Is this a legal loophole I can exploit to get out of a non-compete agreement?

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I work at an ad agency as a freelancer, or "temp," through an employment agency. The ad agency pays the employment agency who then pays me, minus their cut. The employment agency gets about a 40% markup from the ad agency for my services. I would like to cut out the middle man (the employment agency), and try to work directly with the ad agency, still on a freelance basis, thereby effectively giving myself a very fat raise. But there's this damn non-compete agreement.

It says something to the effect that I'd have to wait a year to contact this ad agency for work on a freelance basis without going through them, or I'd have to pay something like a year's salary as a penalty. That's a lot of dough.

I came up with an idea to maybe get around it, but I'm not sure it's legally possible.

What if I incorporate? If I give myself a business name and entity as a corporation, then the ad agency wouldn't be hiring me technically, but "Kickycan Enterprises, Limited," or "Boogie Down Productions" or whatever legal name I decide to use for my company. That sounds like a possible loophole, doesn't it?

Would that be legal and aboveboard? It sounds like it has to be illegal.

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@kickycan,

kicky, I'm sure the legal-begals of the temp company covered their arse on all of that stuff. Your best bet is to find another job - for one year, then return to that company as the primary contract holder. Talk to them first to see if that scenario will work out for them and you.

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@kickycan,

That's actually a very common thing for corporations to cheat on. So far, every corporation I've worked for has screwed the temp agencies out of their ridiculous fees and worked with the individual directly.

In temp-to-hire scenarios, often a significant percentage of the first year's salary is required as a finders fee, but I've never seen a company actually pay it if they thought they could get away with not telling the agency.

But here's what I really came to tell you: the ad agency knows the risks they run, and they are unlikely to just hand you the extra cash. It represents legal risk to them as well and with no savings they have no reason to go along. Additionally, they may actually find the agency useful (even though most companies see them as a last resort and would prefer not to use them it can happen) and think at least some of the fee they pay is justified.

I honestly don't think you can expect to pocket the difference as a raise that easily. I think if the ad agency wants to do it, they'll want to do it for their own savings and not for your raise. They might view the 40% as obscene much in the same way you do.

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@kickycan,

I'm sorry to tell you that a friend of mine in Houston just got sued by an oil company for this very same thing, and while he eventually got the case dropped, he didn't get the new job and he paid a lot in court costs.

Cycloptichorn

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@cicerone imposter,

No guarantee they know what they're doing. One of our local agencies furnished skilled laborers to the city. Neither they, nor the city had the slightest idea that the temps were required to be paid at the prevailing journeyman rates for the craft.

Kicky, you could probably weasle out of it for other companies, but probably not if you were going to continue working for the employer they set you up with. It might be time to invest in a legal consultation. A term of one year may be long enough to give you some serious leverage. I'm thinking it might be lawyer time.

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@Robert Gentel,

Robert,

I wasn't expecting to pocket all of that 40% markup. I was hoping to shoot for a split of the difference kind of deal. I have a pretty good idea of what freelancers make on their own for this type of work, and even if I could only get half of that 40% back, it would be a nice amount for me and still put me on the lower end, wage-wise, for independent freelancers. Does that sound like it could work?

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@cicerone imposter,

Quote:

kicky, I'm sure the legal-begals of the temp company covered their arse on all of that stuff. Your best bet is to find another job - for one year, then return to that company as the primary contract holder. Talk to them first to see if that scenario will work out for them and you.

Yeah, I thought of that, but a year is a long time. A lot changes in a year, and there is no guarantee the job will still be there. It just doesn't seem very likely to work out that way.

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@Cycloptichorn,

Quote:

I'm sorry to tell you that a friend of mine in Houston just got sued by an oil company for this very same thing, and while he eventually got the case dropped, he didn't get the new job and he paid a lot in court costs.

Cycloptichorn

Damn, that doesn't sound too encouraging. Thanks for the info.

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@roger,

I think lawyer time is right. Trouble is I don't know any lawyers. How much do you think it would cost to talk to a lawyer about this?

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@kickycan,

It's hard to say, because your risk is in approaching them at all and not working for them. When the penalty is associated with taking a job for them you only incur risk when it does work, here it seems you incur risk just from trying.

I'm really not sure what I'd do in your shoes, it really depends on my read on the involved parties.

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@Robert Gentel,

Kicky - incorporation is not a "veil" under applicable law if its only reasonable purpose is to bypass an obligation, whether to a government agency (like the IRS) or to a binding contract.

So your criterion should be probable duration of existing assignment with that company - as in, if it looks like long-term (at least another year or two), then you can approach the agency and see if they'll talk to their client about changing the contract terms so the client pays no more that it now does. Otherwise you're headed for the courthouse PLUS risking future assignments with either the agency or their client.

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@kickycan,

Quote:

What if I incorporate? If I give myself a business name and entity as a corporation, then the ad agency wouldn't be hiring me technically, but "Kickycan Enterprises, Limited," or "Boogie Down Productions" or whatever legal name I decide to use for my company. That sounds like a possible loophole, doesn't it?

You are right that the ad agency wouldn't be hiring you. I'lll bet you dollars to donuts that the non-compete agreement you have also prevents you from working for another company hired by the ad agency too though.

So your idea would work... as long as you aren't working for Kickycan Enterprises. Wink

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@kickycan,

The solution to this problem is so obvious that I cannot believe it has not been suggested already: get radical plastic surgery and change your identity.

Honestly, have we learned nothing from the movies?

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another example of how people want to lead lives of principle right up until the exact moment that principle comes at cross hairs with their self interest.

I'm not judging it.... just sayin'....

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@blueveinedthrobber,

Who ever said I wanted to lead a life of principal?

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@kickycan,

isn't incorporation also a pain in the butt?

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@kickycan,

kickycan wrote:

Who ever said I wanted to lead a life of principal?

I never even suspected it... Wink

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@kickycan,

How much longer before the year is up?

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@kickycan,

kickycan wrote:

It says something to the effect that I'd have to wait a year to contact this ad agency for work on a freelance basis without going through them, or I'd have to pay something like a year's salary as a penalty. That's a lot of dough.

I'm curious what it actually says. What if the employer contacts you? What if they want to hire you as a permanent employee (not freelance)?

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It's been over a year already. I'm still freelancing. The company I work for wants to hire me, but this year's economic crapfest has sprinkled turds all over that idea for a while.

Freeduck, I don't really know how that hiring stuff works, but I assume that if they do have some type of finder's fee or some special payment that they need to pay in order to take me on as an employee, it's nominal. I should ask about that. I know there is nothing special required from my side of it.

I'm getting sick of this job. And I'm not getting paid enough. But I know I should just be grateful to have a job. Most of the people I know who do what I do have been unemployed for months, and a couple of them are coming up on two years without a job. Damn, I'd have to move out of the city if that happened to me.

So I'm grateful. But work still sucks.

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Is this a legal loophole I can exploit to get out of a non-compete agreement?

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