Self employed, taking my clients with me

[Riley123]

Hello,

I was employed for a number of years (with no written or signed employment contract) by a limited company.

Whilst building up my client list both myself and the company mutually agreed for me to become self employed as a sole trader working within the same premises to help incentivise and concentrate on building up my client list further with the limited company taking a percentage share of my takings. Again no written contract was put in place.

After 2 years as a sole trader I have now had the opportunity to move into my own premises and after giving the company 1 months notice as a gesture have contacted only my clients informing them of my move to a new address.

The company are now threatening me with legal action for informing ‘their customers’ of my move and stating that I am not to contact my customers what so ever. They are also quoting ‘gdpr’ (which previously has never been mentioned by them) as another reason for not being able to contact my customers.

My work as a sole trader is where the majority of my customers have been built up. My client list and contact details is kept within my own file.

Interested to hear how I stand legally please?

Thank you for any information

 

[MBE2017]

Without any contract or written agreement I doubt they can do anything, but a talk with your own solicitor would be a sensible use of a quick phone call.

Who actually invoiced the clients for your work, yourself or your former ltd company? It seems they consider you to be a worker rather than truly self employed, maybe they should have been paying your tax and NI as well.

 

[Riley123]

Thank you for your reply,

When a customer would make payment it would be immediately either by cash or cheque (no card payment system was in place in the premises).

The cheque would be written with my name and paid into my account. All cash would be paid to me and then a percentage would be passed on to the limited company.

The client would specifically book an appointment with me for a service given by myself, however they were fully aware it was within the premises of the limited company.

Thank you

 

[smallclaimsassistance]

You refer to the clients as "your customers", but whilst that is true, they were your contracting company's clients also.

Your history relates a shift from employment to self employment, but, on what you say, the core activity agreed between you hasn't changed: you take on clients on behalf of the company, and because you take them on on behalf of the company, the company receives a share of the client fee, paid by you as a percentage of your earnings.

The only way that would be wrong is if on your change from employment to self employment, you ceased the activity involved in your previous role and began doing completely different work which was not within the remit of your previous employer, and therefore the sums paid to your previous employer were purely rent. The fact that you paid your previous employer a percentage share of your takings does not support that interpretation.

Assuming that the work you performed both before and after self employment was the same (which appears to be what you are saying), I'm afraid you have this the wrong way round. Your post suggests a perception that the absence of a written contract protects you and your access to these clients. Based on what you say, the absence of a written contract is actually detrimental to your position. Unless you can prove there was an agreement that they relinquished all rights to these clients (which may be difficult if you were still paying the company a percentage of your income) the legal position is probably that the clients are the property of the company, and are not yours to take.

I say "probably" because much depends on what was actually agreed, but all of my above analysis is based upon what you say above, so if your facts above are correct, this is likely to be the legal position. It's therefore not surprising that they are taking the action they are.

They wouldn't have mentioned GDPR before now. The regulations were only effective a couple of months ago.

Dean

 

[Riley123]

Hi Dean,

Thank you for your reply.

I would debate that I wasn’t taking on clients on behalf of the company. I was taking on clients as a sole trader and servicing them within the premises of the limited company.

I take on board and agree that having no written contract would also affect my protection.

I’ve read and taken on board your other points. There’s no assumptions from me either way, which is the main reason for my post to understand the facts and how I stand.

There is more detail that I haven’t been able to include in a short forum post and as you say various agreements have been verbally agreed.

Thank you for your time in replying

 

[Chris Ashdown]

To me it sound like you were a freelance agent getting your own customers and ordering their supplies via the company, which on the sound of it could have also gone to any other supplier you wanted to give them to

Whilst there may be a strong case for the company about existing clients when you worked there, since you went freelance all the new clients would be nothing to do with the company

Again as you found the customers and passed on there details to the supplier, the GDPR should stop them contacting the clients as there point of contact is you , a reversal of what they state

Defiantly need a lawyer to sort out and I imagine one point that will pop up is did during your time freelance , did you do work for anyone else or use any other company to supply your clients. as HMRC may not recognise you as self employed, but that would be the companies problem

 

[Riley123]

Thank you for your responses,

I should also add that the contact with the customers was simply to inform them of my change of address as they had appointments planned with me.

I take on board the point about being a sole trader and whether i should have been employed by the company.

Thank you

 

[SteveHa]

Who was any contract/engagement with the client's with? You, or the company?

 

[Riley123]

Thank you for your reply,

Any contact arranging appointments etc and engagement were always directly between myself and the client.

 

[SteveHa]

If you can evidence that, then the company has no claim on them. This notwithstanding their possible breach of off-payroll working regulations.

 

[Gecko001]

Hello,


Whilst building up my client list both myself and the company mutually agreed for me to become self employed as a sole trader working within the same premises to help incentivise and concentrate on building up my client list further with the limited company taking a percentage share of my takings. Again no written contract was put in place.

Perhaps you need to clarify above statement. Did the clients change from commissioning the Ltd company's services to commissioning your services after you became a sole trader?

 

[smallclaimsassistance]

Hi Dean,

Thank you for your reply.

I would debate that I wasn’t taking on clients on behalf of the company. I was taking on clients as a sole trader and servicing them within the premises of the limited company.

I take on board and agree that having no written contract would also affect my protection.

I’ve read and taken on board your other points. There’s no assumptions from me either way, which is the main reason for my post to understand the facts and how I stand.

There is more detail that I haven’t been able to include in a short forum post and as you say various agreements have been verbally agreed.

Thank you for your time in replying

I appreciate that there is more to this than the facts you have related, and as others say you need to sit down with a lawyer and go through this.

On the information you have given above however, your employment status change does not affect the company's ownership of clients taken on by you, unless, as I said above, on transition there was an express agreement that the company would relinquish rights to the clients. Unless that occurred, your contract lies in any verbal and written representations (which you have summarised above) and your course of dealings, which began with you taking on clients for the company. If there was an agreement between you that this would change that's fine, but it will be for you to prove. Clearly they don't agree, and in the absence of a written contract, or compelling evidence that you are right and they are wrong, the court is likely to default to the terms which predated your change of employment status.

Dean

 

[Paul Norman]

I have two things to offer on this.

First, you need a lawyer. As pointed out by Dean, in two posts thus far, your situation is at best poorly defined. If the company decides to throw money are suing you, they are could win.

Secondly, this is the kind of complexity that happens when people do not do business correctly. Written contracts, clearly set out positions are important. If there was a contract in place that said, in writing, what would happen in the event you leave and take the customers with you then the situation would be clear cut. This is not unique to the opening poster here. It applies to all of us. Do things properly!

 

[Mr D]

And there's reputation damage too.
What happens when the company informs all those customers that you have stolen them from the company?
Any of them likely to think less of you?

 

[The Byre]

A great deal will depend on the mechanics of the booking situation. I call this type of way of doing business 'Brothel Economics', though it can apply to bars, restaurants, shops and schools and even general businesses where people hire a specific person (architect, engineer, etc.) or section of a business (drinks bar, CGI studio) for a specific service.

But back to the mechanics - if you found the customers all by yourself, you maintained the customer list and did not share them with your former employer, you billed and managed them totally, then (IMO) they are probably yours. You were in that case, merely renting space from your ex-employer in the same way that dozens of small companies rent space at a themed commercial building or complex, such as Pinewood Studios or Media City.

However, if you were contacted by the clients via the ex-employer, for example, they came to you because you worked as a separate free-lance architect, but within a large architectural practice and some clients were referred to you because you specialised in building dog kennels (someone has to!) then Dean is spot on.

One of my businesses is a music school and we have just had a teacher for a trial period of a couple of months, part-time - and the little toe-rag has been contacting pupils (that we gave him!) to tell them that they can come to him directly in future. Trust me, his little feet won't touch the ground!

 

[MBE2017]

What was the percentage given to your former employer for? A royalty, use of premises etc? You mention your clients being aware they used yourself within the ltd co premises, how did your clients perceive the relationship, did the believe they were using you, or you through the ltd company?