New employer same job
Discussion
There's a potentially complicated situation arising for some techies I know.
They are employed by firm A, a computer services outfit mainly providing web and cloud services.
A client of firm A, let's say firm B, has a requirement for a development team with a niche skill. Firm A has also provided this for the last 12 months and the requirement is expected to last a few more years. This team, is working near enough full time for this client.
There is a suggestion that firm A might be in the sherbet dip, might drop the development project due to being taken over, or to downsize to their core business, might even go under. Either way the development team would be out of work, two were taken on specifically for this client, and firm B would have a problem.
Supposing the development team formed their own company and arranged with B to carry on doing what they are doing once firm A was no longer involved?
If firm A was no longer selling that skill set would a non compete clause (if any) be relevant? Would working from their own premises on their own equipment help avoid IR35? Would firm A have a right to insist the project was their ball and nobody else could play with it?
They are employed by firm A, a computer services outfit mainly providing web and cloud services.
A client of firm A, let's say firm B, has a requirement for a development team with a niche skill. Firm A has also provided this for the last 12 months and the requirement is expected to last a few more years. This team, is working near enough full time for this client.
There is a suggestion that firm A might be in the sherbet dip, might drop the development project due to being taken over, or to downsize to their core business, might even go under. Either way the development team would be out of work, two were taken on specifically for this client, and firm B would have a problem.
Supposing the development team formed their own company and arranged with B to carry on doing what they are doing once firm A was no longer involved?
If firm A was no longer selling that skill set would a non compete clause (if any) be relevant? Would working from their own premises on their own equipment help avoid IR35? Would firm A have a right to insist the project was their ball and nobody else could play with it?
Austin Prefect said:
There's a potentially complicated situation arising for some techies I know.
They are employed by firm A, a computer services outfit mainly providing web and cloud services.
A client of firm A, let's say firm B, has a requirement for a development team with a niche skill. Firm A has also provided this for the last 12 months and the requirement is expected to last a few more years. This team, is working near enough full time for this client.
There is a suggestion that firm A might be in the sherbet dip, might drop the development project due to being taken over, or to downsize to their core business, might even go under. Either way the development team would be out of work, two were taken on specifically for this client, and firm B would have a problem.
Supposing the development team formed their own company and arranged with B to carry on doing what they are doing once firm A was no longer involved?
If firm A was no longer selling that skill set would a non compete clause (if any) be relevant? Would working from their own premises on their own equipment help avoid IR35? Would firm A have a right to insist the project was their ball and nobody else could play with it?
If they're still employed / getting paid by Firm A then it depends on what their contract says.They are employed by firm A, a computer services outfit mainly providing web and cloud services.
A client of firm A, let's say firm B, has a requirement for a development team with a niche skill. Firm A has also provided this for the last 12 months and the requirement is expected to last a few more years. This team, is working near enough full time for this client.
There is a suggestion that firm A might be in the sherbet dip, might drop the development project due to being taken over, or to downsize to their core business, might even go under. Either way the development team would be out of work, two were taken on specifically for this client, and firm B would have a problem.
Supposing the development team formed their own company and arranged with B to carry on doing what they are doing once firm A was no longer involved?
If firm A was no longer selling that skill set would a non compete clause (if any) be relevant? Would working from their own premises on their own equipment help avoid IR35? Would firm A have a right to insist the project was their ball and nobody else could play with it?
If they get made redundant then any NCC, whilst still valid, would be harder to enforce. It also needs to protect a legitimate interest; if Firm A is no longer doing that work they can't really prevent others from doing that work.
If firm A does go under, from the moment that becomes official employees may do what they wish.
If firm A remains but downsizes and the employees are laid off or leave, they will have a restrictive covenant that would prevent them engaging with firm B for a period of time. This might be negotiable.
If they do go out on their own and form a limited company which only has firm B as a client, they may not necessarily fall under IR35 but HMRC may well want to have a look to determine control, substitution, mutuality of obligation etc. Best practice would be to get a second client.
If firm A remains but downsizes and the employees are laid off or leave, they will have a restrictive covenant that would prevent them engaging with firm B for a period of time. This might be negotiable.
If they do go out on their own and form a limited company which only has firm B as a client, they may not necessarily fall under IR35 but HMRC may well want to have a look to determine control, substitution, mutuality of obligation etc. Best practice would be to get a second client.
Austin Prefect said:
If firm A was no longer selling that skill set would a non compete clause (if any) be relevant? Would working from their own premises on their own equipment help avoid IR35? Would firm A have a right to insist the project was their ball and nobody else could play with it?
Depending on what exactly the product and services entails Firm A will may well have ensured that, quite aside from any non-competes, they owned the intellectual property… if they do, that’s potentially far more serious than a non-compete. StevieBee said:
If firm A does go under, from the moment that becomes official employees may do what they wish.
If firm A remains but downsizes and the employees are laid off or leave, they will have a restrictive covenant that would prevent them engaging with firm B for a period of time. This might be negotiable.
If they do go out on their own and form a limited company which only has firm B as a client, they may not necessarily fall under IR35 but HMRC may well want to have a look to determine control, substitution, mutuality of obligation etc. Best practice would be to get a second client.
I believe this is most likely. Your contract of employment will likely have a clause about non-solicitation (as will the MSA with firm B have regarding firm A's employees). So if they go under, then have at. But if not, it will be more complex given the likelihood of a restrictive convenant in the contract with B.If firm A remains but downsizes and the employees are laid off or leave, they will have a restrictive covenant that would prevent them engaging with firm B for a period of time. This might be negotiable.
If they do go out on their own and form a limited company which only has firm B as a client, they may not necessarily fall under IR35 but HMRC may well want to have a look to determine control, substitution, mutuality of obligation etc. Best practice would be to get a second client.
Another consideration to keep in mind is why firm A is looking like it could go under.
There are many reason, one of which may be that they are not able to charge their clients enough. It's important to consider what firm B is willing pay because if their expectation is no more (or even less) then any new company set up to serve them may end up facing the same problem unless they can manage overheads accordingly.
There are many reason, one of which may be that they are not able to charge their clients enough. It's important to consider what firm B is willing pay because if their expectation is no more (or even less) then any new company set up to serve them may end up facing the same problem unless they can manage overheads accordingly.
StevieBee said:
Another consideration to keep in mind is why firm A is looking like it could go under.
There are many reason, one of which may be that they are not able to charge their clients enough. It's important to consider what firm B is willing pay because if their expectation is no more (or even less) then any new company set up to serve them may end up facing the same problem unless they can manage overheads accordingly.
The team in question is a very small part of firm A, doing something slightly separate from the core business and with negligible overheads other than office space and employment costs.There are many reason, one of which may be that they are not able to charge their clients enough. It's important to consider what firm B is willing pay because if their expectation is no more (or even less) then any new company set up to serve them may end up facing the same problem unless they can manage overheads accordingly.
Similar but not identical situation happened at where I work a few years ago. Some consultants were laid off, and set up independently to work on the same stuff they were previously employed to do. This happened with the company’s blessing, and we subcontract some stuff to them even today.
So, the company might be fine with it if they have to make you redundant - but best check with them if it comes to pass would be my advice…
So, the company might be fine with it if they have to make you redundant - but best check with them if it comes to pass would be my advice…
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