News

Banning “Ban on Assignment” clauses

Recruitment Business directors, you find me on the verge of getting professionally excited again.

If the draft legislation currently known as the Business Contract Terms (Assignment of Receivables) Regulations 2018 is introduced, it will literally shave minutes off my day and the advice I give to agency recruiters.

Yes, this draft bill proposes that ban on assignment clauses become ineffective. This can only be good news to agency recruiters, RPOs, clients, solicitors, and Invoice Discounters.

For anyone out there who hasn’t had the delight of reviewing one of these clauses in a client contract for agency recruitment, it currently means that if the Recruitment Business uses an Invoice Discounting (“ID”) facility, any invoice raised as a consequence of a contract with a ban on assignment clause in it won’t be assigned to their ID facility provider. This can either have an impact at the time the Recruitment Business needs to raise finance against that invoice but can’t because it can’t be assigned to the ID provider; or worse still, if the ID provider attempts to collect the debt only to find it hasn’t actually been assigned to them, but they have already advanced funds to the Recruitment Business against it.

The big RPOs are the worst culprits for using ban on assignment clauses. Most of the time the requirement for these clauses is passed down from the client, which can determine how negotiable they are. If the RPO and/or the end client won’t remove the clause, it can mean the Recruitment Business can’t raise finance against any invoices raised under that contract. Obviously this will impact on cash flow if the Recruitment Business has to pay the contractor before the client has paid the RPO who has paid the Recruitment Business. Add a “pay when paid” clause into that mix and you’re in for a whole lot more fun, but that’s the subject of another blog on another day.

Recently I’ve reviewed some pretty reasonable clauses that do ban assignment but not to the extent that assignment of the invoices is to an ID provider. I thought that was pretty progressive, but this bit of proposed legislation is going to make life so much easier. It will be one less thing for Recruitment Businesses to push back on in what is, let’s face it, a very typical way of funding agency contracting.

So watch this space, & I’ll let you know as soon as ban on assignment clauses are banned.

Lucy Tarrant