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  1. #1
    Join Date
    Jun 2009

    Default Subcontractor-To-Contractor-To-Client Non-Compete

    My question involves employment and labor law for the state of Michigan...

    This seems to be a unique situation. I relocated from New York to Michigan to work as a Technical Consultant for Consulting Company A. After resigning from my previous job and relocating to the midwest, I was informed by my new employer that I would be required to sign a Non-Compete Agreement as a condition of my employment. I was not happy about this... The agreement says that I can not compete by working for Company A's clients by providing "Computer Programming, Engineering, or Data Processing Services" for one year after I leave the company.

    This is where things get weird...

    My employer (Consulting Company A) places me at Consulting Company B, a larger consulting firm in the area. I am not an employee of Consulting Company B and have no agreements with them. Consulting Company B then places me at one of their client accounts...Let's call them The Client.

    Two weeks ago, Consulting Company A informed Consulting Company B (after a month-long dispute of billing rates) that they would be terminating their contract and pulling me from my position at The Client. Consulting Company A has no other project lined up for me, and because of the nature of my work, any other project would force me to travel out-of-state (a real bummer, as I relocated to be closer to a family member who is being treated for cancer).

    Now, The Client wants to hire me directly. The Client and Consulting Company A have no relationship whatsoever. In fact, The Client has never heard of Consulting Company A.

    More interestingly, The Client would like to hire me in a completely different role than the one I served under Consulting Company A. I would not be performing any of the services mentioned above as part of my job description.

    Is there any was that Consulting Company A can claim that The Client is in fact "their client" and that I have violated my agreement?

    Really appreciate any feedback on this. Thanks!

  2. #2
    Join Date
    Jan 2006

    Default Re: Subcontractor-To-Contractor-To-Client Non-Compete

    well, since you were employed by A and you were doing work for Client, Client is a defacto client. A was effectively providing services to Client due to the fact you represented A and were doing work for Client.

    The Client and Consulting Company A have no relationship whatsoever
    yes they do. You (company A) did work for the Client. That is a very close relationship in my eyes.

    but if you were not providing any of these services in the new role:

    "Computer Programming, Engineering, or Data Processing Services"
    the first point would be irrelevant.

    what services would you be providing to the Client?

  3. #3
    Join Date
    Jun 2009

    Default Re: Subcontractor-To-Contractor-To-Client Non-Compete

    First of all, many thanks for the response...

    I would be joining The Client as a Business Analyst, having nothing to do with programming, engineering, or data processing.

    I can understand your point regarding the relationship as a "defacto client." However, if my current employer (Consulting Company A) moved to terminate the relationship with his client (Consulting Company B), is it possible that The Client (of Company B [not my employer]) could then be viewed as a "defacto client?"

    If my employer is breaking the agreement, how can he prove that he has a legitimate business interest to protect? He also currently has no other clients to speak of where he could place me.

    What about the fact that he did not inform me of the non-compete requirement before I resigned from my previous job and relocated to Michigan?

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