Is it wrong not to renew a contract without notice? My company inserted bunch of new clauses at the last minute [closed]

Question

Since the start of 2017, I have worked as an independent contractor at an agency that contracts out technical consulting work. I also freelance in my off hours and on my weekends. I have some rare skills that are in great demand, and I charge a very high rate for freelancing. However for my work through the agency, they cap my rate at a figure that is a half to a third of what I get freelancing.

Even though I realised I was massively underpaid for my agency work, I stuck it out because I had signed a contract that ran until the end of 2017. However, at the start of November, I met with my boss and the CEO and told them that I would leave unless they paid something comparable to I was getting from freelancing. They did not agree. I verbally agreed to work part-time for a month or two in early 2018 to smooth out the transition, and also introduced them to a potential replacement (who has skills that are worth what they are paying, but lacks my technical knowledge). I think they are holding out hope that they can find someone else with my skills who is willing to work for what I was. But with the way the industry is going, this is going to be extremely difficult now.

Anyway, on the evening of my second last day at work in 2017, I got a huge shock. The agency gave me a copy of a new employment contract to sign that was different in many ways to the old one. Specifically, the new clauses are:

1. It contained a non-dealing clause that specifically mentioned that it would be enforceable even after I quit working for them (with no expiry period). The previous contract had no restrictive covenants at all.

2. It stated that I could only make contact with clients using my company email / phone number, on pain of huge damages. I cannot do this because I need to use cloud services (that I pay for out of my own pocket) in order for our clients to access files that are too large to send by email. And the phone that my company provides is antiquated, so I always use my own phone with a different number.

3. It extended the notice period that I need to give when making changes to my availability (or terminating the contract), from 3 weeks to 2 months.

4. It gives the company intellectual property rights to anything I develop for their clients.

5. It requires me to document the progress of my work using an in-house developed system that is inferior to the freeware that I currently use. In order to do my job properly, I would need to keep using the freeware on top of their in-house software. In other words, I would need to document everything twice.

Any of these 5 clauses on their own would be deal-breakers for me.

I emailed my boss about it, spelled out my concerns and asked to have a meeting on the last day of work in 2017. He did not reply until the evening, when he said he was having a day off work. He asked me to talk about the contract next year.

Since then I've logged into their online scheduling system and seen that they have given me a part-time schedule of work in January (taking advance payments from clients) even though I am not under contract then any more. About half of these jobs are things that no-one else at the agency would have the technical knowledge to do. For the other half, they probably couldn't find another person to do it at short notice because we are stretched thin. In other words, if I don't work for them this month, they will have egg on their face from having to cancel jobs on clients (who could sue if they really wanted to).

My previous contract said nothing about providing notice of renewal or non-renewal of contract, so legally I would be fine if I refused to renew the contract. But ethically and professionally, would this be right?

Part of me thinks that this situation is their fault for springing the clauses on me at the last minute. I think the post-termination non-dealing clause is stupid because the agency has many clients with technical requirements that only I can satisfy (apart from knowledge, I have invested in hardware and software to be able to do this). If I leave then then the agency will lose their business anyway.

What should I do?

Also, I would like to leave this company on good terms and get a good reference from them.

Answer 1

My previous contract said nothing about providing notice of renewal or non-renewal of contract, so legally I would be fine if I refused to renew the contract. But ethically and professionally, would this be right?

You are under no obligation - legally or ethically - to "renew" the contract.

You used the term "renew" here, but realistically, every contract is a new contract. In your case, you found brand new terms, and you aren't happy with them.

Treat this as you would a brand new offer. If the offer isn't to your liking, you could choose to attempt to negotiate a contract with more preferable terms. Or you could simply choose to reject the offer and move on.

Don't be shocked. You wanted contract changes. Apparently, they wanted contract changes. Maybe you can meet in the middle, maybe you can't. These things happen in the life of a contractor.

Answer 2

Is it wrong not to renew a contract without notice?

...

...at the start of November, I met with my boss and the CEO and told them that I would leave unless they paid something comparable to I was getting from freelancing.

The premise here is all wrong. You gave them notice. Two months' worth. That's far more than the two weeks they'd get from an employee. They also knew this contract ended at the end of 2017; any business-school freshman should be able to tell you that there are no guarantees that contracts will be renewed.

...if I don't work for them this month, they will have egg on their face from having to cancel jobs on clients (who could sue if they really wanted to).

That is in no way, shape or form your problem. The company is responsible for making itself look good in front of its clients by attracting and retaining staff or contractors to get the work done. It's already 2018 and the contract they had with you for 2017 is no longer in effect. As of this moment, they've failed.

Only the company knows whether what it did was because of incompetence or part of some ill-conceived tactic to get you over a barrel. The tack they've taken is "we understand you don't like the arrangement we had in 2017. Here's one for 2018 that's even worse, and we think you'll go for it because we think you're desperate for work." That's a badly-calculated risk for them if they know your absence will adversely affect their business and after having been given ample notice that not bringing a better offer to the negotiating table would mean your departure.

If you verbally agreed to put in some time after the first of the year and want to honor that, tell them you're willing to execute a one-time, limited-duration extension to the original contract. Do it in writing and make sure part of that extension includes the company's acknowledgment that if a contract for the rest of 2018 is not signed by the end of that period, you're done. You are under no obligation to give the company your services at a deep discount, which is what they're asking.

Also, I would like to leave this company on good terms and get a good reference from them.

A lot of questions asked here want this, and the reality is that having this kind of bad situation resolved in a way that makes everyone happy is a rarity.

You need to make a business decision: If the value of leaving on good terms and getting a good reference exceeds the costs of another year of below-market compensation and the additional restrictions, knuckle under, sign the new contract and live with it. If not -- and this is what I recommend -- go find your next gig.

Answer 3

As you have been advised by others.

Don't sign

The agency is in a bad spot and they think they can put the squeeze on you. Sounds like they are realizing how dependent they are on you and they don't even understand your work process.

Give them the terms you require. You met with them the start of November and they declined. They are the one springing new terms last minute.

Don't work without a written signed contract. They let the contract expire.

Answer 4

I've been in ALMOST this exact spot.

First, DO NOT SIGN ANYTHING!! Even "agreeing" to something via email can be construed as contractual, so keep that in mind.

Second, you have cloud services under your control that they need to service their clients. Whether or not they can use it is immaterial, but when your contract ran out, any data in those services is probably stuff you're no longer authorized to access. Stop ALL processing of data on your cloud services IMMEDIATELY and send them an email asking how they would like to arrange for handoff of the data or services. Doing ANYTHING with your cloud services for them could be construed as implicitly accepting a contract extension. Put a clause in the email stating that you were surprised that no one has contacted you about this.

Third, ENGAGE AN ATTORNEY - If the relationship really is ending, then you need to be very careful about how you "tie up loose ends." The agency has gone full-sleaze on you. Don't get caught in their machinations.

Finally, get your "house in order" on your systems. Get whatever you have of theirs or their customers onto removable media, and be prepared to "drop it off" (Recommend bonded courier with signature receipt required) to them.

[Edit] Jan Doggen makes a very good point that (to me) should be obvious, but for purposes of those reading this answer later:

"For all jobs you take on from now, make sure that you have this mixture of personal and company accounts/software agreed upon up front, or better: don't mix anything. If you want to use better software for communication etc. set up separate accounts that you can hand over after the job is done."

Just to get it into the answer before comments are cleaned up.

Answer 5

You would be acting extremely unprofessionally if you even hinted to your agency that their behavior is in any way acceptable.

Professionalism constrains your behavior in two directions. You must always act ethically and honestly, and you must always insist on being treated ethically and honestly. You cannot provide worthwhile services to any party who does not take you seriously. Your agency and your clients may not know it, but they need to respect you so they can trust your work.

"I verbally agreed to work part-time for a month or two in early 2018 to smooth out the transition."

And in response they tried to impale you on a five-barbed shaft. I have been dealing with all manner of agencies for forty-five years and I have never seen such insulting behavior as this.

"Part of me thinks that this situation is their fault for springing the clauses on me at the last minute."

Wrong. All of you should think that. Now that they know you are leaving, this is their last-ditch effort to get you under onerous control and make it harder for you to slip their leash.

"Also, I would like to leave this company on good terms and get a good reference from them."

If the reputation of the agency is accurate and their true behavior is well-known, a good reference from them might be toxic. In any case you can't afford to associate with them any longer.

Answer 6

Don't sign plain and simple. If you feel bad because you had a verbal agreement don't, first off verbal agreements have no obligation to you and secondly they changed the terms themselves which would already mean the agreement is no longer what you agreed to verbally.

Of course you can still try to work things out to make it acceptable to both, but if they are not willing to do that its their loss really no reason for you to be undervalued. Ethically you are not responsible for mismanagement on their end. Whatever you do DO NOT start any work without a contract, nor contact or do anything else with clients and company property while you are not under contract.

Answer 7

Don't sign. Make them a short-term counteroffer for your hourly billing rate for finishing the current work according to previous overall conditions. This will allow them to avoid the immediate consequences of problems that are entirely their own fault, while not putting you worse off and allowing to negotiate open-ended without imminent pressure. Don't accept any new or long-term work without a new contract you feel fine accepting.

Clients can behave stupidly: that may partly be an organisational rather than individual problem. Being professional means minimizing damage for them while not bearing unreasonable consequences or costs yourself. If you create conditions that allow them to come to a reasonable agreement without breaking their current business, they should be grateful. Or not. Either way, blaming you and cultivating resentment will be a lot harder than if you just quit without notice.

Answer 8

I think you and the agency have different understandings of the situation. You see yourself as having a high paying freelance business that you can grow by giving it more time, but are offering to help with the transition to help them out and in hope of a good reference. The agency's actions are all consistent with them assuming you are depending on part time work through them to steal clients and kick start the freelance business.

In this view, they think you need them for the first part of next year, so you will be available, and will agree to their terms. They also think they need to protect themselves from having their clients diverted to your freelance business.

I do not think you should do any work for them until you have a meeting of minds. Your obvious starting position in any negotiations is the terms you would offer to a normal freelance client. Since you are also a competitor, it may be reasonable to agree to some constraints on doing direct work for some of their clients for some period of time.

Answer 9

Look out for yourself, and in this case it means you should not agree to their new terms. You have been more than fair to assist them in the transition. I can tell you even the best rated companies are looking out for themselves and not for you. I say this based on my more than 30 years in corporate jobs and the last 21 at one company who is publicly well respected but is horribly run and despised on the inside for taking advantage of employees. Stay in the drivers seat!

Answer 10

This is very location dependent and I would advise getting professional legal advice, or even professional advice from the local council or government employment-related bodies.

Where I live, a European country, there are interesting laws that (surprisingly) employers are often unaware of:

• A non-compete clause in the contract means that if the employment agreement is terminated by the employer, the employer is obliged to pay you full salary for the duration of the non compete clause. In essence, under the new contract if they fired you, you would be on a year's wages or more for doing nothing.

• A short term freelance contract with the agency is now under European law very close to a full time contract. i.e. you are entitled to holidays and holiday pay, same as a full timer, if you are (I think) exclusively or primarily paid by that agency

• Intellectual property remains the author's where I live. Rights must be exclusively transferred in the contract and even then it's a fuzzy thing.

It's not clear from your post, but it looks like they have you on a contract but want you as a full time employee, getting the best of both worlds. In my location this is basically illegal and the company could be setting themselves up for a pretty big fall with this approach. It is possible that you are already a permanent employee in the eyes of the law (ie. a software development house calling themselves an agency, to hire full time professionals under freelance contracts, is illegal where I live. It is tax evasion and employment rights violation.)

I would also add that the margin they are making on you, the difference you notice between working for them and working direct for clients, should be to cover risk. If, for example, you should suffer an injury or worse, and be unable to work temporarily or permanently, the risk of that loss of reputation and business is what they are charging for. If they have their business model worked out well, your disappearance has already been priced in. Don't worry about them seeming to be banking on your presence. It's just psychological pressure.

In short, check the legalities carefully. Don't be afraid to renegotiate the contract. You are a skilled professional, you will easily find alternative work. Don't be afraid to risk a little in the name of your personal values. In the meantime don't show up for work.

Answer 11

It is wrong for your business for you to not sign the contract and just walk away. You need to offer the agency an alternative that meets their need to fill their client obligations as well. My suggested action plan would be to immediately contact the agency and tell them that you can not sign the contract that you were given but you will work for another week under the terms of your previous contract. Let them know that after one week, if an acceptable contract is not in place, you will bill at your freelance rate or stop working until a new contract is in place. It sucks that they provided you with the unacceptable renewal contract on the last day of the year but it is partly your fault for not having specific language in the previous contract that indicates the deadline for receipt of a renewal agreement.