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I was offered a job by a US software company. On my first day at work they told me they couldn't actually hire me for legal and technical reasons.

So, now they want me to be a consultant and to become self-employed.

I had plans to buy a house in UK soon, and now I won't be able to do it unless I provide at least 24 months of invoices as self-employed.

Nobody is taking responsibility, they are blaming their 'solicitors'.

Therefore, my question is: how can I handle this situation (sudden request to change contract) in a professional way?

  • 4
    "now I won't be able to do it unless I provide 24-36 months of invoices as self-employed" - is that based on what you've read, or have you actually verified that with the bank? I'd imagine you could convince them of your earning power from your old pay slips and that your situation is stable with whatever documentation from the new company, but I don't know what level of assurance they need. – Rup May 5 '16 at 9:05
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    Did the signed contract allow them to do that? – Mario Trucco May 5 '16 at 9:17
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    I wonder if the "extra costs" they're trying to avoid here are things like paid time off and public holidays, tax and national insurance contributions, and other benefits. A generous package may not turn out to be really very generous at all if it doesn't include those kinds of things. – Spudley May 7 '16 at 7:15
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    In the U.S it's easy for a company to lay-off an employee for no reason, but the U.K has certain laws in place that don't allow them to do that; the OP should be covered under these laws and I do wonder whether the U.S company is aware of that. – AStopher May 7 '16 at 18:29
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    The fact that they think it's going to cost them more than they expected almost certainly implies they think UK jurisdiction is relevant here. Work to the original signed contract, to the letter. If they don't pay you it's constructive dismissal plain and simple.(You can still look for other jobs in the background and resign, but seek professional advice). – Flexo May 9 '16 at 8:10

13 Answers 13

146

Let's think about this:

Either the company was shockingly incompetent in hiring you or intentionally misleading. Despite having accountants, solicitors, and an HR department, they apparently did not figure out the cost of employing you before offering you a written contract? That is quite a mistake to make, but I suppose it is possible. A more worrying possibility is that this was a bait-and-switch, and they never intended to hire you on the basis of the original contract. Ultimately, you can't know which of these is true, but it doesn't reflect well on the company either way.

Their response after making a mistake has been combative. I would expect a mistake of this magnitude to be followed by a much more conciliatory response. Some of the problems I see:

  • They refused to just take the financial hit and hire you anyway. A company that values its employees should just bear this cost, as it was their mistake, rather than trying to back out of a signed contract--unless they legitimately can't afford to pay. But being unable to afford one extra year of your salary is hard to believe: they seem like a pretty good sized organization, based on your description of the situation, and surely your salary is not that big!
  • They are tone-deaf to your situation. Insisting they are being "generous", after they just messed up in a way that will clearly cost you big time, is quite worrying. They ought to be apologetic, but instead they are trying claim your unhappiness with their huge mistake is your problem!
  • They are nickel-and-diming you by not being flexible at all on covering your extra expenses.
  • They have no problem turning up the pressure in contract negotiations, treating you as an adversary rather than a new team member that they value. Adding a new clause about suing you seems like a pressure tactic. The refusal to add any protections is worrying.

All in all, this adds up to a situation in which I would be worried about my future working for this company, no matter how these negotiations turn out. Therefore I would take a less "friendly" approach to the negotiations. Two options I see:

Fight for the original contract, contacting a solicitor to assess your options. I'm not qualified to give legal advice. But it seems quite possible that what they are doing is not legal.

  • They may be failing to honor the contract (even if there is a probationary period where they can swiftly terminate you, they appear to have been acting in bad faith). I don't know the right technical terms for this, but I would be surprised if there was no basis for challenging this in UK employment law.
  • They also appear to be pushing to classify you (wrongly) as self-employed. This is not just something that can be designated arbitrarily. You have to actually function as self-employed to be classified this way.

It's possible that raising the illegality of their actions might convince them to retreat and offer the original contract. Or, in the event that things can't be worked out, you may be able to take them to court and collect damages (whether the size of the damages would be worth the hassle is not something I can answer).

Another option is to go the self-employed route, but insist on being really self-employed. State that if you are going to be self-employed, you want to send them a quote for the agreed work, with a price that you set, and that they can negotiate from that as a starting point. Also, if you are self employed you need freedom to do the work when and where you please, and take other clients. You can point out that UK tax law requires this sort of thing--these aren't unreasonable demands you are making. This will give you more freedom to seek other opportunities. It will also give you more control of the situation, making it harder for them to further take advantage of you in the future.

Both of these options carry some risk. If you really feel you can't walk away from this job, it limits your negotiating options, but the second one is less risky, and you can do that one more mildly if you choose (the first option is pretty much all-or-nothing).

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    Not sure how it works in UK, but in several countries self-employment has a few conditions, including having more than a single client, because that qualifies instantly as disguised employment. – njzk2 May 5 '16 at 18:35
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    IR35 outlines what it means to be 'self employed' in the UK. Practically speaking - "if it looks like a duck, and quacks like a duck" - if you're acting as if you're an employee, you are legally speaking, and employee. How this works over international boundaries though, is "complicated". – Sobrique May 5 '16 at 20:57
  • Comments are not for extended discussion; this conversation has been moved to chat. – Monica Cellio May 10 '16 at 18:30
83

Tell them that this is not what you signed up for. They have gone back on your agreement and violated your contract, before you've even started work. Say you regretfully must decline to work with them.

And when they come back at you with nonsense about how you've signed a contract, remind them what that contract says. No court is going to side with them defending a contract that you're walking away from because they have completely broken it already.

Any further discussion takes place through your lawyer, only.

In the meantime, call up your old supervisor, tell him it didn't work out, and ask whether there is room for you to return. It hasn't been very long, so that may very well be possible. It might sound strange but there's really no shame in simply returning to your job. I work with three people who have gone off and varyingly worked for other companies for a bit (later realising their mistake) since they first became my colleagues.

41

I would walk away from this US clown company and either find a serious company or get the old one back. Obviously, they treat their employees as disposable cattle and not resources and you don't want to be near anything like that. I think their "additional expenses" claim is ridiculous as they should have thought about that before. Sometimes, under the right circumstances, going back to your old company could result in an increased salary.

Please write a blurb on glassdoor.com or similar sites to warn others about this despicable company.

17

I am not a lawyer. You need a lawyer. The legalities in the UK of unilaterally changing a contract of employment are complex. The UK is not the US, and employment is not generally "at-will".

Changing a contract you have agreed to on day one, with no notice at all, is certainly bad practice and probably illegal in the UK. "We didn't expect the expenses we're incurring" is surely not a valid reason to change a contract on day 1 and the courts will almost certainly take a dim view of it because due diligence should have been undertaken in drawing up the contract. Unexpected expenses may be a valid reason to give you your contractual notice of dismissal, if there is one (the statutory notice period only kicks in after a month).

You could attempt to enforce the contract you originally signed. You could accept the new contract. You could accept their abrogation of the original contract, not accept their new contract, and walk away, possibly to rejoin your previous employer. You must get the advice of an employment lawyer.

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they added a new clause where the company might sue me to hell and back if they find it appropriate

That's a contract that I might be disinclined to sign.

For example as an employee I wouldn't expect to be sued if someone finds a fault in software that I've written (because I expect them to test it too, etc.) ... but as an contractor (perhaps a.k.a. "independent supplier") I'm not so sure. What if they were sued by their client, and they tried to deflect the liability onto me?

They may allow you to tweak the wording of the contract slightly (before you sign it, assuming your request is reasonable and they want to employ you).

For example I once altered a contract so that it said I could expect to be sued in the case of "gross negligence", instead of just "negligence" (I decided there's a difference between negligence and gross negligence and the latter would be more difficult to prove).

If you are going to be self-employed, here's quite an interesting video I watched recently on the subject of legalities -- Mike Monteiro: F*ck You, Pay Me

  • Re: "For example I once altered a contract so that it said I could expect to be sued in the case of 'gross negligence', instead of just 'negligence' (I decided there's a difference between negligence and gross negligence and the latter would be more difficult to prove)": That sounds like the sort of thing you should get legal advice about (unless you're already legally qualified). Your supposition sounds commonsensical, but the law is not entirely (or even mostly) about common sense. – ruakh May 5 '16 at 23:00
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    I understood your point, and I don't disagree with it, but I do disagree with the lack of a big "you should discuss this BS with your lawyer first". :-P – ruakh May 5 '16 at 23:30
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    That's the subject/substance of the video recommended in the last paragraph. – ChrisW May 5 '16 at 23:31
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    The clause is probably an attempt to turn the questioner into a genuine contractor and not a disguised employee who's going to run foul of IR35. If your limited company is responsible for the quality of what you do, then that's taken as an indication that you really are selling a service and not just evading tax and/or NICs on employment income. – Steve Jessop May 6 '16 at 14:48
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    "Negligence" is something that you do all the time when you are not behaving absolutely perfectly. "Gross negligence" is something that would be really badly wrong. – gnasher729 May 7 '16 at 14:39
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You can start your one-man limited liability company in the UK and use it to maximise your income by being tax-efficient.

Instead of a monthly salary, you would agree on a daily rate. I'd say that £100 gross daily rate (that is you pay all your cost, taxes, etc out of that rate) is equivalent to about £15,000 annual pre-tax income (your official income where the employee withholds tax and employee's national insurance).

Any threats of suing you are void, as long as you make sure any contract is between them and your limited liability company, and that there is no money in the company by paying out everything as dividends. Which is not optimal for tax purposes, but what can you do.

BTW. No need to handle this professionally. You need to handle this in the way that is most beneficial to you.

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    Be careful you can get caught for disguised employment under IR35 – Pepone May 5 '16 at 20:45
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    I don't think the disguised employee will be the one in trouble if they are caught. – dyesdyes May 5 '16 at 22:47
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    @dyesdyes I wouldn't be too sure about that. – Mast May 6 '16 at 9:30
  • IR35 is hard if you have a contract that makes you liable for all kinds of things. – gnasher729 May 6 '16 at 11:37
  • @dyesdyes IR35 would definitely apply if the OP has only one client and works full time for that client - and that would have a significant tax impact. The hiring company may also be affected but who cares... – assylias May 6 '16 at 15:01
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The contract appears to be a bait-and-switch, in that they tempted you away from your previous employment with a very generous sum, only to rescind said contract after you accepted, which I believe violates good faith in terms of legality, and certainly illegal.

Now they have you in an unfavourable situation, they will attempt to whittle down and remove the benefits and hope the pressure of needing a job forces you to accept the now unfair and dubious terms.

The fact they continue to, like a classic Nigerian scam email, offer you generous sums whilst whittling down your rights (being self-employed means they can terminate you at any time, and the lawsuit clause means they can sue you like a third party: basically, they intend to get you to work for them, then sue back the 'generous' money they give you) is highly suspicious and a red flag for underhanded approaches.

This is a malicious company, and I would actually go so far as to recommend detailing your experiences online publicly and outing the company so other people do not fall for this trap. Such underhanded practices should not be tolerated nor disguised.

5

As you've already pushed back on the T&Cs for the consultant role, it sounds like what you've got is pretty much their final offer, so it's now up to you to decide what you want to do. You've got three options:

  • Take the consultant role, with the intention of staying in the role long-term.
  • Take the consultant role, but start looking for a new role ASAP.
  • Reject the consultant role.

Any of these can be handled in a professional manner: the first is easy, the last is simply "Sorry, I'm looking for a role as a permanent employee". The second is perhaps the trickiest, but so long as you do your job as well as you can for the period you're working for your employer, it's going to be "just one of those things". Your potential employer has screwed this one up massively, so you shouldn't be expected to go out of your way to deal with their HR mess, and you've got to earn money in the meantime.

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    You seem to be familiar with UK employment contracts. Do you really think there is no basis to challenge the employer's actions legally? A probation period probably exists, but the employer's actions seem borderline fraudulent (using one contract to lure someone to a job and then switching to different terms). Of course taking legal action would ruin the relationship with the company, but if one plans to reject the role anyway, it might be worth it. – user45590 May 5 '16 at 9:29
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    @dan1111 They're certainly incompetent. Showing that they did this maliciously or were grossly negligent (which is what you'd need to do to win a court case) would be significantly trickier, and almost certainly not worth the amount of money you'd spend on it. – Philip Kendall May 5 '16 at 9:39
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    @PhilipKendall that is often (usually?) true of actual legal action, but threatening to take legal action is much less costly and can get results. In this case, it seems that could be done credibly. And the company might really fear this, since they seem ignorant of the reality of doing business UK. Not saying I'm advocating this, but... – user45590 May 5 '16 at 9:49
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    @dan1111 it wouldnt surprise me if there was a case for constructive dismissal here - acceptance of employment offer, with the offer being substantially altered after that acceptance and a signed contract being returned. – Moo May 5 '16 at 10:03
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    @nekomatic If the contract specifies a notice period, I don't see how they get out of paying for that, at least. I would ask at Citizens' Advice and then decide whether it's worth going legal or just walking away. – richardb May 6 '16 at 17:11
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At first sight it looks like there is a good legal case against the USA Company. However UK employment law gives very little protection to someone until they have been in a job for some time. Assuming the notice period on the employment offer was 1 month, the most you are likely to win from the company in a legal case is 1 month’s wages. (But you may get them to pay you 3 months wages, if they don’t wish their name to be all over the papers.)

But trying to force a company outside of the UK to pay up, even when ordered by a UK court is expensive and likely to fail.

Don’t sign a consultant contract with them in your personal name without getting very good legal advice!

Tell them you will need to consult with a UK lawyer on your return to the UK before you agree to anything. Get them to pay ALL your expensive for the trip the USA cleared in your bank account, before rejecting any offer they make!

If you create a limited company in the UK, and only sign any contracts in the company name you can protect yourself from most risks of them suing you. To cover the costs of running the company etc, expect to get “paid” double what you would in a “job”.

Personally I would get as much compensation out of them as possible due to them misleading you about the job and you leaving your past job, then find some other work. Life is too short to a setup as complex as what they are trying to get you into.

2
  • I would find it hard to work for that company after these events. So forcing yourself into it should probably not be what you want.

  • The issue is pretty clear; they stepped out of the contract on day 1. What does your contract say about how that works? Does it have a clause where they have to keep you on for at least XXX amount of time?

  • Signed contracts cannot simple be "changed" by one party. Get a lawyer, get at least your costs back from them (that means the missed income during the time you are without job, etc.), and make perfectly clear that you will not be their victim. Depending on whether U.S. or U.K. law applies (both of which I'm not terribly familiar with) you might have more or less leverage.

1

Have they increased the monetary value of their offer now they are asking you to be a contractor? Being self employed means that you lose the benefits of having an employer: you will need to pay your own employer's national insurance and you won't get holiday or sick pay, etc. etc.

As a rule of thumb, as a contractor you should be looking for roughly double the salary that you would receive as a full time employee.

1

So yes, they've broken your original contract and they're trying to make things even worse by strong-arming you into a situation that adds a ton of uncertainty. The natural answer here is sue them for lost earnings, emotional damage, etc and go back to your last employer. But there are a couple of separate issues:

  • Getting money out of them will be hard. We're talking a tribunal here and then chasing them across the planet to get that enforced in their jurisdiction. This isn't easy or cheap.

  • Your old employer is under no obligation to talk to you ever again. If your leaving hurt them or there's any animosity, you can expect a demotion and a pay cut.

So by all means talk to your old employer and ask for a firm, written offer of employment and a lawyer because you have been wronged, just don't expect these to put everything right.


Just as a quick sidebar, there are significant issues when hiring somebody full time in the UK. I say that speaking as somebody who works exclusively as a self-employed contractor for small companies here. They avoid a lot of taxes and paperwork by keeping me out of their PAYE schedule. A foreign company with no other presence here has a ton of stuff to set up.

They've probably done the sums, looked at what the worst-case outcome of being sued for lost earnings from breach of contract and have worked out that it would be cheaper to take that risk and push you toward a cheaper way of working.

They've been both stupid and nasty in a small amount of time, but given the climate of zero-hours contracts, unpaid internships, etc... They're neither the nastiest or the most unfair employer in history. There might be something to salvage here.

And if you can forgive past sins/idiocy (or your old employer won't touch you) you can make this a lot more favourable by doing one simple thing:

Get paid up front (demand an advance)

Contracts clearly mean zip for them but you can have them insure themselves against this sort of nonsense and demand as much certainty as you need in advance. If halfway through your "contract" they say they don't need you any more, that's A-Okay. You've already been paid.

So as a little not-too-silly, not-too-risky example, you could ask them to structure your payments as so:

Day 0         12 months salary
Months 1-9    Zero. Nada.
Months 10+    Normal monthly salary

If they stop paying you at any point, they breach, contract over, and you at least 3 months severance. I'm front-loading that by 12 months above because that's when companies are their most fickle.

If you need more certainty than that, ask but expect them to nibble this back. If they start getting stupid again, you can wave your offer of work back at them, the breached contract and tell them that if they try to pursue you, you have considerable UK and EU law on your side.


If buying a house is the most important thing, being employed is the most important thing here. Spend too long away from it and you'll either count as self-employed or between jobs (which can be a 6-month penalty with some lenders). Brokers can help explain your contract to banks' underwriters but you might have to put your plans on ice for a year or two.

It seems likely you might incur a loss of some description here, so if you do, please seek the opinion of a solicitor. I'm not a lawyer and your chances of pursuing crappy contracts internationally might be much better/cheaper than I'm saying.

-1

I would go the self employed route. Keep in mind that being self-employed is far better paid than standard full-time employment (expect to double your post-tax salary). Read up about IR35, as this will give you an idea of what you'll need to work towards as a proper limited company. You can get a mortgage as a contractor - you're best off going through a mortgage broker specialising in contractors (I used a fantastic fee-free one who works on recommendations), as the underwriting is performed differently, and this is not typically accessible direct via the branch.

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    Is it "far better paid" because the pre-tax/gross income is higher, i.e. must the OP ask for a higher pay because of being (i.e. in order to be) self-employed? – ChrisW May 5 '16 at 21:58
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    This is about general self employment; it doesn't address the specific offer the OP received ("self employment" at the same rate as the previous employment contract). – user45590 May 5 '16 at 22:12
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    In this case, the offer appears to be considerably worse than being an employee. – Simon B May 5 '16 at 23:45
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    Being self-employed should command a completely different offer. The OP shouldn't ask for a higher pay - he should ask for a T&M contract based on his company (which he would need to set-up) providing services to their company. – AdCar May 8 '16 at 20:21
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    @AdCar, agreed, but what should happen is not what has happened. The organization is not going to happily agree to double salary for the same work, when this whole situation was precipitated by their unwillingness to pay the original salary. As it stands, this doesn't really answer the question that was asked. – user45590 May 9 '16 at 11:34

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