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Old 12.03.2018, 15:22
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Any legal adviser here? Need assistance on non-compete clause for contractor

I am a contractor specialising in bookkeeping/accounting/financial reporting.

My client is refusing to sign our agreement because of this clause in the contract:
"You agree that Contractor may provide services to your competitors or other parties whose interests may conflict with yours, as long as Contractor does not disclose your confidential information and complies with their ethical obligations"

In short, he is requesting that I refuse any client that is in the same business as his company.... Anyone out there can shed some light on this?

He is concerned, among others, that I might use at his competitors the same templates that, by the way, I have created for his company. We're talking about income statement, balance sheet and other ad hoc spreadsheet tools which help with visibility on revenues, charges, etc.

Thanks
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Old 12.03.2018, 15:41
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Re: Any legal adviser here? Need assistance on non-compete clause for contractor

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I am a contractor specialising in bookkeeping/accounting/financial reporting.

My client is refusing to sign our agreement because of this clause in the contract:
"You agree that Contractor may provide services to your competitors or other parties whose interests may conflict with yours, as long as Contractor does not disclose your confidential information and complies with their ethical obligations"

In short, he is requesting that I refuse any client that is in the same business as his company.... Anyone out there can shed some light on this?

He is concerned, among others, that I might use at his competitors the same templates that, by the way, I have created for his company. We're talking about income statement, balance sheet and other ad hoc spreadsheet tools which help with visibility on revenues, charges, etc.

Thanks
How much extra is that clause worth to you, 10%, 50%, 500%?
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Old 12.03.2018, 15:42
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Re: Any legal adviser here? Need assistance on non-compete clause for contractor

And what exactly do you want legal advice on?

Is this clause even necessary? By default I would assume if you are a contractor you are also free to contract to other companies - as long you don't have a particularly forbidding clause in your contact. So just remove the clause and keep business as usual?

IANAL and all that, but it seems to me you dug your own hole there?
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Old 12.03.2018, 15:45
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Re: Any legal adviser here? Need assistance on non-compete clause for contractor

Although it is also usual that work you have created during your contract belongs to the employer and as such you don't own to give to someone else.

However, templates and all that you could claim you had before? Unless you created them particularly as part of your work....
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Old 12.03.2018, 15:55
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Re: Any legal adviser here? Need assistance on non-compete clause for contractor

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I am a contractor specialising in bookkeeping/accounting/financial reporting.

My client is refusing to sign our agreement because of this clause in the contract:
"You agree that Contractor may provide services to your competitors or other parties whose interests may conflict with yours, as long as Contractor does not disclose your confidential information and complies with their ethical obligations"

In short, he is requesting that I refuse any client that is in the same business as his company.... Anyone out there can shed some light on this?

He is concerned, among others, that I might use at his competitors the same templates that, by the way, I have created for his company . We're talking about income statement, balance sheet and other ad hoc spreadsheet tools which help with visibility on revenues, charges, etc.
You did the work for your client. If it was ordered and paid by them it is normally now their IP and you can not reuse it. Just like any other ordinary employee which can not take his code and work home and reuse it in an other company.

It is a different case if you had developed those tools prior your commitment and you brought it into the company as some kind of library or tool set.

The contract should clearly state whose IP will be used, how it is licensed, and who is the owner of the IP specifically created for the client.
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Old 12.03.2018, 16:13
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Re: Any legal adviser here? Need assistance on non-compete clause for contractor

Why do you first work for a company as a contractor and later find out there are problems since customer will not sign your contract? This is asking for problems.
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Old 12.03.2018, 17:08
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Re: Any legal adviser here? Need assistance on non-compete clause for contractor

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...
In short, he is requesting that I refuse any client that is in the same business as his company.... Anyone out there can shed some light on this?

He is concerned, among others, that I might use at his competitors the same templates that, by the way, I have created for his company. We're talking about income statement, balance sheet and other ad hoc spreadsheet tools which help with visibility on revenues, charges, etc.

Thanks
He can of course demand that you refuse his competitors. Nothing wrong with that. What you can do is, restrict the definition of his business. For example your client is a diary producer in Switzerland, so do you reject all dairy companies in Switzerland? No. But you can committ to not provide services to dairy companies from the canton of Zurich who make flavored yogurts. How much you can negotiate is really depending on you and the client.

Also, if he is worried that you will use IP developed for his company, he is justified. He has paid for it and it belongs to him. However, if you had existing templates, you did not give away the right to those. So anything over and above what you had from before and was built for him, you can't use it.

If you are a single person operation and want to provide service to a direct competitor, any client will worry so you have to mitigate that risk.

However, not including that clause and doing work for competitor can be treated as a breach of confidentiality obligations and might prove costly.
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Old 12.03.2018, 17:40
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Re: Any legal adviser here? Need assistance on non-compete clause for contractor

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And what exactly do you want legal advice on?
I basically wanted to know if his request (not to work for competitors) can be enforceable

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Is this clause even necessary? By default I would assume if you are a contractor you are also free to contract to other companies - as long you don't have a particularly forbidding clause in your contact.
I agree with you, I would also assume that a contractor is free to work for other companies, competitors or not. It didn't even cross my mind that he would argue over this. The clause was included to be clear that it may happen and avoid misunderstandings/disputes (quite frankly it is pretty remote as I don't have clients queuing at the door!). Now I am thinking I should have just left it out...
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Old 12.03.2018, 17:46
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Re: Any legal adviser here? Need assistance on non-compete clause for contractor

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Why do you first work for a company as a contractor and later find out there are problems since customer will not sign your contract? This is asking for problems.
Thank you for the helpful reply. Did I say anywhere in my original post that I first started out as a contractor for this company?
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Old 12.03.2018, 17:51
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Re: Any legal adviser here? Need assistance on non-compete clause for contractor

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Thank you for the helpful reply. Did I say anywhere in my original post that I first started out as a contractor for this company?
Your first post implies you're a contractor for a company who won't sign your contract, or possibly not, but then your post is pointless.
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Old 12.03.2018, 18:02
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Re: Any legal adviser here? Need assistance on non-compete clause for contractor

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Thank you for the helpful reply. Did I say anywhere in my original post that I first started out as a contractor for this company?
You might want to read your first post again, and rewrite it if needed to give more clarity.

As for this:

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I basically wanted to know if his request (not to work for competitors) can be enforceable
As for employees it is under the correct circumstances.

As for contractors, if you do not agree with the terms than do not take the work.

And in general, you cannot simply take work for which company A paid you to do towards company B and expect everybody to be happy with it.
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Old 12.03.2018, 18:07
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Re: Any legal adviser here? Need assistance on non-compete clause for contractor

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I basically wanted to know if his request (not to work for competitors) can be enforceable
IANAL but AFAIK companies do often have more or less specific non-compete clauses in employment contracts, sometimes even applicable for a period following the employment contract (to prevent know-how transfer to competition). These are mostly quite difficult to enforce, particularly post-employment. But in a case where a contract particularly forbids parallel work, and the employer finds out and can prove that an employee did work at the same time for two companies, said employee is not in a very good position and could in principle be sued for damages and things can get nasty

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I agree with you, I would also assume that a contractor is free to work for other companies, competitors or not. It didn't even cross my mind that he would argue over this. The clause was included to be clear that it may happen and avoid misunderstandings/disputes (quite frankly it is pretty remote as I don't have clients queuing at the door!). Now I am thinking I should have just left it out...
Now it seems you were tempted to have this unnecessary clause to get around using items created under one contract in another contract and not just for providing services. And here 1) this clause would not have protected you and 2) in any case you can't reuse those creations unless you prove said creations were pre-existing the employment.

Now, if you are only talking about some templates and presentation material, I would say nothing prevents you from re-creating those templates (just make sure they are sufficiently different - wording, formulas, etc) to use in another contract. The only thing preventing you to do that would be if your employer patents them, which would probably be an overkill.

However, do balance out the prospect of pissing off an existing employer against a (currently fictional) alternative one...
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Old 12.03.2018, 18:13
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Re: Any legal adviser here? Need assistance on non-compete clause for contractor

Thank you for your post!

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He can of course demand that you refuse his competitors. Nothing wrong with that.
What I feel is wrong in that is the loss of earnings as a result of rejecting a client. I am a one-man band, trying to make a living...

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What you can do is, restrict the definition of his business. For example your client is a diary producer in Switzerland, so do you reject all dairy companies in Switzerland? No. But you can committ to not provide services to dairy companies from the canton of Zurich who make flavored yogurts. How much you can negotiate is really depending on you and the client.
OK, that could be a compromise.

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Also, if he is worried that you will use IP developed for his company, he is justified. He has paid for it and it belongs to him. However, if you had existing templates, you did not give away the right to those. So anything over and above what you had from before and was built for him, you can't use it.
Thank you, I understand the difference.

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If you are a single person operation and want to provide service to a direct competitor, any client will worry so you have to mitigate that risk.
I totally understand this. My profession, like that of a lawyer is regulated, any breach of our code of standards and I lose the right to practice.

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However, not including that clause and doing work for competitor can be treated as a breach of confidentiality obligations and might prove costly.
The clause itself addresses confidentiality and I have a separate clause in the contract dedicated solely to confidentiality. I should think it amply addresses that point.
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Old 12.03.2018, 18:46
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Re: Any legal adviser here? Need assistance on non-compete clause for contractor

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Your first post implies you're a contractor for a company who won't sign your contract, or possibly not, but then your post is pointless.
Although it is totally irrelevant information to the question I was posing, I am a contractor for this company, it just happens that I did not start out as a contractor for them and we are now formalising the relationship. Does that make it clearer for you?
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Old 12.03.2018, 18:56
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Re: Any legal adviser here? Need assistance on non-compete clause for contractor

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IANAL but AFAIK companies do often have more or less specific non-compete clauses in employment contracts, sometimes even applicable for a period following the employment contract (to prevent know-how transfer to competition). These are mostly quite difficult to enforce, particularly post-employment. But in a case where a contract particularly forbids parallel work, and the employer finds out and can prove that an employee did work at the same time for two companies, said employee is not in a very good position and could in principle be sued for damages and things can get nasty
Yes, I agree that in an employment contract, a non-compete clause is justified. It is not the case here though, the contract is not creating an employment relationship.

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Now it seems you were tempted to have this unnecessary clause to get around using items created under one contract in another contract and not just for providing services. And here 1) this clause would not have protected you and 2) in any case you can't reuse those creations unless you prove said creations were pre-existing the employment.

Now, if you are only talking about some templates and presentation material, I would say nothing prevents you from re-creating those templates (just make sure they are sufficiently different - wording, formulas, etc) to use in another contract. The only thing preventing you to do that would be if your employer patents them, which would probably be an overkill.

However, do balance out the prospect of pissing off an existing employer against a (currently fictional) alternative one...
I would not say the clause is unnecessary, it was supposed to address the possibility that I could contract to companies in a similar line of business. He just raised the question of templates whilst discussing it. Regarding those and IP, I am now clearer so that point is resolved. Thanks for your input
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Old 12.03.2018, 18:58
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Re: Any legal adviser here? Need assistance on non-compete clause for contractor

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Although it is totally irrelevant information to the question I was posing, I am a contractor for this company, it just happens that I did not start out as a contractor for them and we are now formalising the relationship. Does that make it clearer for you?
You sound friendly

So let me get this straight:

While being an employee at company A you made things for company A for which company A payed you, and now you are upset since they will not sign your contract which does contain a paragraph which in your clients (Company A) opinion would allow you to use these things freely at other companies.

The fact that you state out so clearly that "YOU HAVE CREATED" them, gives me the feeling that client is correct in his thoughts.

However to answer your question: You can just take out that sentence of the contract, and unless company A takes into the contract that you are not allowed to work for other companies in the same business you can work for whomever else you want. You however are without explicit permission not allowed to use these things "YOU CREATED" at other companies.

And bear in mind that if customer does not want to have you working for other companies, he can very simply not give you any work if you choose to do so.
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Old 12.03.2018, 22:30
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Re: Any legal adviser here? Need assistance on non-compete clause for contractor

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I am a contractor specialising in bookkeeping/accounting/financial reporting.

My client is refusing to sign our agreement because of this clause in the contract:
"You agree that Contractor may provide services to your competitors or other parties whose interests may conflict with yours, as long as Contractor does not disclose your confidential information and complies with their ethical obligations"

In short, he is requesting that I refuse any client that is in the same business as his company.... Anyone out there can shed some light on this?

He is concerned, among others, that I might use at his competitors the same templates that, by the way, I have created for his company. We're talking about income statement, balance sheet and other ad hoc spreadsheet tools which help with visibility on revenues, charges, etc.

Thanks
Unless you are contracting for another bookkeeping services company, that is you are contracting for a company which main business is about technology or production, not just accounting, then I really don't see any cons if you do the accounting for company A and company B which is a direct competitor to A as long as you keep the confidentiality. Limiting your options is just an evil practice IMHO. It's your choice but I would rather keep the clause and wait for their final move. If they won't work with you, so long, you can still work for all the other competitors.
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Old 13.03.2018, 07:33
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Re: Any legal adviser here? Need assistance on non-compete clause for contractor

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Although it is totally irrelevant information to the question I was posing, I am a contractor for this company, it just happens that I did not start out as a contractor for them and we are now formalising the relationship. Does that make it clearer for you?
Is that what you'd say to a lawyer? "I'm not answering your question because I, in my inifinite wisdom, consider it irrelevant."?

Your circumstances are still unclear. You are the one wanting free advice, and now you're getting all arsey because people are asking questions which you have decided are not relevant. Way to go to engender helpfulness in people. But hey, I'm a glutton for punishment.

Now, I've worked as a contractor, on and off, for over 20 years, and in that time I've picked up some lay experience of contracts, intellectual property rights and non-compete clauses. However, I am not a lawyer.

So far it seems.
a. You worked for the company as a bookkeeper/accountant/financial reporter
b. You have now decided to set up on your own, and your former employer wants to take you on.
c. Your client (no longer your employer) doesn't like the clause in the contract you've drawn up.

or

i. You've found a new client
ii. Your client doesn't like the clause.

Questions.
1. Is the contract full time for your client?
2. Did you create the templates while an employee of the client?
3. Are the templates a deliverable for your contract with the client?
4. is the client in the business of supplying financial services?

If the answer to all four is "no", then your clause is not unreasonable. As mentioned above, you have to decide how much the clause is worth to you. If you can't reach an agreement, then walk away.
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