exclusivity agreement when contracting?

zoe llewellyn

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Jan 3, 2018
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I am trying to find out the legal status when contracting to a location/gym and then the owner demands exclusivity eg: marketing upselling and working for a competitor or setting up a gym within a certain radius or current location. I was under the impression this is not legal to demand such restrictions nor that the law stating a company can demand this exclusivity with an employee who signs a Non compete agreement, still doesn't add up in court. I am sure its a european law that stipulates you cannot demand this from someone who contracts? Really could do with some clarity.
 

zoe llewellyn

Free Member
Jan 3, 2018
3
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hello Peter
no I have a Personal Trainer whom is self employed and contracts to a gym. it was a fluid situation until now the new owner wants to still have the PT to use and upsell the gym and membership but expects the PT to sign an exclusivity agreement where he will not trade outside the gym, and not work inside a 20 mile radius and not set up any competition. however he can continue to use the gym but if a current client becomes a new member the PT will lose that client. It's very messy but I am sure if you are self employed paying a commission no one can legally allowed to demand this. I would be very grateful for any advice. thanks
 
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barryo

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Sep 5, 2010
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Depends whether you're an employee or a contractor, as you mention both in your post.

It can be difficult for an employer to enforce a non-compete agreement if it means the ex-employee is prevented from earning a living. The courts have generally sided with the ex-employee except where the employer can clearly show that information (such as customer lists, trade secrets, etc.) have been taken by the employee for use in a new employment before leaving. Employers used to be able to take fairly draconian measures against ex-employees under what were called "Anton Piller" orders from the court, where the employer's representatives could enter an ex-employees home and/or other premises, without prior notice, to search for incriminating documents etc. It has been reported that up until the 1990's around 500 such orders were issued each year in the UK. Since then their use has dropped dramatically and most search orders are now sought in accordance with the Civil Procedure Act 1997. Nevertheless, an employer has to pass some very stringent tests before getting such an order from the court.

Many employers now use "Garden Leave" provisions in contracts of employment, whereby the employee agrees that after leaving employment he/she will not take another job or set up or join another company for a period of time (say 6 months), during which the ex-employee continues to be paid as if he/she was still working for the company. These agreements are much easier to enforce through the court.

There is much less protection for contractors than for employees. The courts usually take the view that if someone enters into a contract, so be it. If it includes clear non-compete or similar "restraint-of-trade" provisions then it is highly likely to be relatively easily enforcable through the court.

Of course, in any post-employment or post-contract dispute it is the lawyers who usually win. If an ex-employer or ex-client comes after you it can be very expensive indeed. For example, if they merely threaten to take out an injunction against you it can cost many thousands just to respond, let alone the costs of fighting any subsequent action. I'm afraid that this is an example of the old saying that those with the deepest pockets are most likely to win.
 
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barryo

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Sep 5, 2010
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Hi zoe

I sent my post from 5 mins ago before I saw your explanation in your post at 2.43pm.

It seems to me that your PT's between a rock and a hard place. It's correct that no one can force anyone to accept a change to an agreement, but where does that leave your PT? If he doesn't accept the new owner's demands, will he be able to carry on working in the way he wants? But if he does accept the demands he should be prepared to comply with them. Breaking a contract can be a serious and costly affair.

Sorry I can't be more optimistic.

Barry
 
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Gecko001

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Apr 21, 2011
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hello Peter
no I have a Personal Trainer whom is self employed and contracts to a gym. it was a fluid situation until now the new owner wants to still have the PT to use and upsell the gym and membership but expects the PT to sign an exclusivity agreement where he will not trade outside the gym, and not work inside a 20 mile radius and not set up any competition. however he can continue to use the gym but if a current client becomes a new member the PT will lose that client. It's very messy but I am sure if you are self employed paying a commission no one can legally allowed to demand this. I would be very grateful for any advice. thanks

The terms and conditions seem to be similar to those of an employee rather than a self-employed person. He could argue that he is going to be effectively an employee and wants to be employed as such.
 
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kulture

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    The terms and conditions seem to be similar to those of an employee rather than a self-employed person. He could argue that he is going to be effectively an employee and wants to be employed as such.

    Thats a good point. With such a restrictive contract if would be difficult to argue that he is self employed.

    In business this should be seen as a negotiation. The starting position is clearly in the Gym's favour. Negotiate a better contract or walk away.
     
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    Newchodge

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    If the PT is genuinely self employed, such a restrictive covenant would be of great interest to HMRC, as it almost certainly means that they are in an employment relationship with the gym. Your PT should go back to the gym and point this out, accepting the restriction in return for paid holidays, paid sick leave, pension entitlement and everything else an employee gets.
     
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    I actually own a gym and I can say we have similar terms with our teacher-contractors too. There is absolutely nothing in this that would suggest an employer/employee relationship, anymore than when Microsoft bring in contractors for a project, they agree not to work at Apple whilst they are working at Microsoft.

    Essentially, these are the terms that the owner wants to engage contractors with. They want to ensure the person they are putting time and money into, advertising their services, etc, is not going to use that to take their clients to another venue.

    It's very standard in the health and fitness industry.

    That said, I wouldn't expect to be able to go after someone in a legal sense if they broke the agreement, it's more along the lines of 'if you do any of these things, you won't be working for us again'.
     
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    Newchodge

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    Are you seriously saying that it is industry standard to tie a self employed contractor into a clause like this? Are you serious? Your employees need to start getting some legal advice.
     
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    Wow, you guys really don't stop to think do you.

    Unbelievable!

    That's like telling a carpenter, if you put some shelves up for your neighbour, you'll be fired! It is about as mean-spirited and nasty an attitude, as I can imagine!

    No, it's nothing like that at all. Not even remotely close. Horrible straw man argument.

    The closest I can come to, using your carpenters analogy, is it's like saying I'm putting on a production of War of the Worlds and I am looking for a carpenter to help build the set. But I'd prefer one who isn't working on another production of War Of The Worlds, just down the road, at exactly the same time, because I don't want said carpenter taking my set design and gifting it to my nearest and dearest competitor. It's certainly not a perfect analogy, but the best I could come up with using the carpenter example. It's entirely reasonable and done by every company that uses contractors in the world - whilst you're working for me, you don't work for my nearest competitors doing the same role. Come on, is this really so hard to grasp?

    Are you seriously saying that it is industry standard to tie a self employed contractor into a clause like this? Are you serious? Your employees need to start getting some legal advice

    Yes, that's exactly what I'm saying. I have a duty to protect my employees, business and self-employed contractors from having our collective work undermined by one of them working AT THE SAME TIME as they work with us, with one of our competitors. This is not strange in the least and self evidently not a big deal for those contractors or I wouldn't have 43 of them on my books!

    They are not employees, so no legal advice required. Maybe don't see this in the black and white frame of the law - see this as 'I have some work that needs doing - one of the terms of deciding who gets this work is that I don't want to have to compete for the resource of a contractor with my nearest competitors and the commercial sensitivity that then inevitably results from that'.

    Really, I cannot understand why you think this is so heinous. Why on earth would I want to work with someone who I know is leaving our site to go straight to our competitors site with all the information we have just been discussing? That would be insane! Especially when I don't have to - there are lots of contractors out there, many of whom would love to work with us (and do), as we pay well, and don't bat an eyelid at not being able to work for our competitors at the same time.

    Bear in mind we are specifically talking about contractors - my duty to my actual employees is greater than to that of our contractors and making sure they still have a job next week is my only priority. One of the ways I ensure that is by not giving our competitors access to our processes.

    Maybe I do take it a little too seriously, but given that our nearest competitor was literally setup, by a contractor who was still working for us, as a carbon copy of our business, five miles down the road, I am more than a little sensitive to the motivations of people who are not employees of the company. Contractors come and go and this presents a risk that must be addressed.
     
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    Bad example - you can't have two crews making the same movie! Movie themes get 'optioned' and you buy the rights to that subject for a period, with a big payday if the movie gets made.

    But I get the point - except that carpenters working on one movie in studio 7 may also be working on another (maybe even very similar) movie in studio 8 next door. It is in the very nature of hiring contractors.

    But if a movie producer, director, set-designer, cinematographer, or any other major figure come up with a new and funky idea for achieving an effect, that idea will be in countless movies within weeks. For example, Kubrick's ideas for set design in The Shining (illogical sets, walls that moved, interiors larger than exteriors) brought all kinds of innovations that every movie maker has since copied.

    If you hire Weta Digital for your CGI movie masterpiece, they will use all the technology they learned on War for the Planet of the Apes. When Mary Tyler-Moore (MTM Productions) created Hill Street Blues for NBC, she hired Steve Bochco to direct and when that series finished, he took all the ideas and most of the crew to 20thC Fox and ABC, to create NYPD Blue.

    A friend of mine worked for Hewlett-Packard as junior project manager. Then he got a job at IBM as a full project manager, taking with him all the knowledge and experience that HP had given him.

    People do 'homers' and nearly every music teacher also has a few private pupils, nearly every personal trainer does a few private gigs on the side.

    And talking about movies - every person on a movie set is a contractor. Every single one. And unless you can provide all those people with at least eight hours work every day, they have to do other things at the same time, to make ends meet.
     
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    STDFR33

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    I actually own a gym and I can say we have similar terms with our teacher-contractors too. There is absolutely nothing in this that would suggest an employer/employee relationship, anymore than when Microsoft bring in contractors for a project, they agree not to work at Apple whilst they are working at Microsoft.

    Essentially, these are the terms that the owner wants to engage contractors with. They want to ensure the person they are putting time and money into, advertising their services, etc, is not going to use that to take their clients to another venue.

    It's very standard in the health and fitness industry.

    That said, I wouldn't expect to be able to go after someone in a legal sense if they broke the agreement, it's more along the lines of 'if you do any of these things, you won't be working for us again'.

    So you want security, whilst offering the workers no security? Doesn't seem fair to me, and it sounds as if these workers are actually employees.

    If you haven't got the employment status right (highly likely) It'll catch up with you eventually and when it does, it will be very, very costly.
     
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    Bad example - you can't have two crews making the same movie! Movie themes get 'optioned' and you buy the rights to that subject for a period, with a big payday if the movie gets made.

    I meant a play, rather than a movie, and I was only using it because I was trying to stick with the carpenter analogy - I did say it wasn't an ideal comparison.

    So you want security, whilst offering the workers no security? Doesn't seem fair to me, and it sounds as if these workers are actually employees.

    If you haven't got the employment status right (highly likely) It'll catch up with you eventually and when it does, it will be very, very costly.

    Again, this is very standard across most industries that routinely use contractors. You don't expect your contractors to be working with your competitors at the same time they are working for you. There is no lack of security for them - they agree a contract with you, they fulfil the contract, get paid, then move onto their next contract, which can be with whoever they like.

    In that respect they are like employees, in that you wouldn't expect your employees to work for your competitors whilst they are working for you (and a lot of companies put non-compete clauses in that apply for a period after they have finished working with you).

    That is the only respect in which they are like employees. Believe it or not, and this may well come as a shock to you, this isn't my first rodeo and I and my partners did actually go through a process to ensure we employed the people that were doing what is unquestionably an employee role, and bring in contractors for those roles that are specifically..contracting roles. They meet all the criteria to be badged as contractors - if they are unable to work one particular day, they can send a replacement; they don't wear a uniform; they perform no 'office holder duties', etc etc.

    Do you honestly think that contractors brought in to do some coding at Microsoft are free to freelance with Apple at the same time? I absolutely guarantee you they are not, nor would they expect to be.

    I worked as an IT contractor for a number of years and every single contract I did had a clause in it forbidding me from working within a certain distance if it was a local based company, or taking a contract with a competitor of the one I am planning on working for, or both. Not once did I think this was inappropriate at all.

    Not that it makes any difference from a legal perspective, but the reality on the ground is that, to a man (and woman), not one of my contractors wants to be employed. They enjoy the freedom freelancing gives them as well as the tax arrangements that work for them. The only restriction on where they can work that we put in place is that they cannot work for a direct competitor, one running an organisation in the same way ours is, within a specified distance, whilst they under contract with us. These are the firms that we directly compete with and competing for customers is tough enough without running the risk of a contractor encouraging our customers to go to their 'other venue'. We do not place any other restrictions on them - they can do their own thing wherever they want, they can work at other businesses that are outside of our catchment area, all whilst enjoying a guaranteed income from us on an open ended contract that can be terminated by either party at any time.

    They really do not complain, it's an arrangement that is genuinely mutually beneficial. The only people that seem to be vexed about it are all on this forum!
     
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    I don't. I forbid them from working at my nearest competitors. They can work anywhere else they like, they can run their own show wherever they like.

    Maybe you should see it that they can potentially generate income from 1000 different places, and I am asking them not to work at about 10 of those 1000 places.

    The nature of the work is that most contractors can work a max of maybe 4 hours, 5 at a real push, in a day, so only contracting them for a couple of hours is really not a problem. This is not a job you can do full time, as in 7 hours a day, you'd die of exhaustion. The vast majority of our contractors do other work, in different fields, and enjoy being able to have two careers, or enjoy being able to both work, pretty much setting their own hours, and look after their children/parents/whoever.

    Again, I'll reiterate, not one of my contractors has any problem with our arrangement. And we've been running like this for nearly ten years.

    Actually....that's not true. We did have one contractor who, having worked with us for about six months, said they wanted to work at another venue, literally 100 yards up the road and resented not being able to. We agreed (amicably) they should leave and go and work at multiple venues, as that's what she ultimately wanted to do. Fast forward another six months and she came back, asking for the same contract she's previously had with us as she had found that, surprise surprise, the other venues also did not want her working with their competitors, so she ended up with significantly less work than she had when she was with us. She is still with us now.
     
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