I’ve been unhappy with the consulting company (call them Company X) I’ve been contracting with for some time. They take a huge rate cut compared to other firms I’ve dealt with, and are not very competent (they missed payroll last Friday - ahem). I like my actual client that I work with, and they’d like to extend me for a year. But I am loath to stay with the firm I am contracted through.
I have an S-Corp, and have a corp-to-corp contract with Company X. And just two weeks ago, Company X was acquired by another company. Company X, being incompetent in many ways, did NOT provide me with an documentation to assign my old contract to their new owner company. So I have been working for a couple of weeks now with (maybe) no real contract, as I think Company X ceased to exist at the point of the merger. From what I can tell, all the assets of Company X were sold or distributed to the purchasing company. I’m not even sure legally that I should be at my client every day – not sure how the new owner can even bill them for my hours because they have no agreement with me.
I’ve emailed a couple of times about the agreement (I at least want to see it). Last email I told them I’m uncomfortable even going to work at my client, as I am not sure how they can legally bill for the hours I’m working. I told them I am unwilling to backdate any legal paperwork they send, and that I also felt obligated to tell the client what is happening. I told them they could tell the client, or I would. This did get a response. They said they’d provide the agreement by EOD today (but nada as of 7:45 pm). And they didn’t respond to the point about telling the client… I didn’t tell him today, but feel like I should tomorrow.
So. My corporation’s contract with Company X from last year has a one year non-complete clause in it for after my contract terminates with Company X. It does not say anything about it being assignable. I have been Googling trying to figure out if that clause is enforceable in this acquisition situation. And it sounds like maybe it isn’t – Company X doesn’t exist any more, and I haven’t assigned my contract to the new entity. But the answers are a little vague – there is some case law supporting getting out of it, but it sounds like it depends on the state. I’m in WA state, so is the employer, and the new company is in Delaware. Now… I’d need to get the client to agree to let me switch to another firm. Honestly, they’ve save money and I’d make money if we made the move. But… the client might not go for it, either.
Thoughts from anyone with employment law knowledge? I know that non-compete’s ARE enforceable in many states and many situations, and I’d probably be stuck if it weren’t for this fluke of acquisition activity. (Oh, and I plan to consult my own attorney here in WA, probably tomorrow, but thought the hive mind might be able to help, too).
“(Oh, and I plan to consult my own attorney here in WA, probably tomorrow, but thought the hive mind might be able to help, too).”
100% correct thing to do.
I have an opinion but I think only an attorney should advise you on this one. you could and/or the company that you work with could both find yourself in a lawsuit if you make the “wrong” choice how to proceed. talk to your lawyer than use that as your guidance. good luck.
You need to find out exactly what type of acquisition this was. Many times Company A will acquire Company B but company B remains intact, at least for a period of time, just with different ownership. Find that out and yes, talk to an attorney.
I don’t know WA law (or if WA law even applies in your situation). But please, please do not do anything that compromises yourself based on the assumption either that (a) the contract between your S corp and Company X is not assignable, or (b) the noncompete clause in the contract is not enforceable. If I am guessing, I would guess that both of those statements are untrue.
Also, in simple terms, there are three basic ways to do an acquisition. In the least common one, the existing target company remains alive, and the contract would not need to be assigned. In another, your contract would be assigned as a matter of law, and without any need for your consent. Only the third (and most common) would present a need to go through the step of assigning your contract from the selling company to the purchasing one.
They are asking everyone to assign there contracts. But I certainly won’t do anything without talking to an attorney. I did notify my client today of the situation of not having a contract with the new entity. My client had no idea they’d been acquired.
What I saw on the independent contractor contract they accidentally sent me looked like the original Company X does seem to be fully dissolved.
There is another possible angle. My client might just ask them to let me out of the non-compete. I’ve seen it happen for steady clients.
Not paying you on time is a breach of contract. Examine your contract to see if that releases you from the non-compete. It also depends on the scope of the non-compete, generally a non-compete preventing you from practicing your profession is not enforceable.
If it is a consulting company probably both parties have a ‘do not hire’ type of contract. You are not allowed to solicit their client to work directly for them and they are not allowed to hire you away from the company.
I have no interest in working for the client as a permanent employee. I like my freedom. Just would strongly prefer to work through a different consulting firm. These guys can’t even take me out to lunch – the person from Company X offered to take me to lunch one day, and she picked the place. Well… it was cash only, and she didn’t have any cash. So I bought lunch. She said she’d pay me back, but then nothing happened for a month. Eventually I emailed her about something else, and she remembered and sent the money. I mean, that could happen to anyone, but when you forget to pay back…
I got the contract assignment from them today, but am going out of town for D2’s graduation for the weekend. Told everyone I wasn’t dealing with it until I get back.
They said they’d provide the agreement by EOD today (but nada as of 7:45 pm). And they didn’t respond to the point about telling the client… I didn’t tell him today, but feel like I should tomorrow.