Do Independent Contractors Have to Abide by Non-Compete Clauses?

Are you an independent contractor who is being asked to sign a non-compete clause? If so, you may be wondering whether this non-compete clause would be enforceable. The agreement between an employer and an independent contractor is unique and unlike a typical employer-employee relationship, as an independent contractor operates as their own business. There are many reasons why non-compete clauses can be problematic and unenforceable in these scenarios.

Generally speaking, your non-compete clause may very well be unenforceable. But it is a good idea to consult with a non-compete lawyer prior to signing your non-compete. If you have already signed one a qualified employment lawyer will be able to assist you in understanding your rights and the enforceability of your non-compete clause.

What Is A Non-Compete Clause?

Non-compete clauses are sometimes included in an employment contract between an employer and a prospective employee. These clauses come into effect once the relationship between an employee and employer has been terminated. Non-compete clauses aim to protect the business from having a former employee conduct business that would be in competition with their own. These contracts must be signed during the initial employment contract and have limitations such as geographical areas and lengths of time.

Will a Non-Compete Be Enforceable as an Independent Contractor?

If you are an independent contractor who has signed a non-compete contract, there is a good chance that it may not be enforceable. Non-compete clauses are often unenforceable due to their restrictive nature against the employee. Even in typical employer-employee relationships, the enforceability of non-compete clauses are limited. Our previous article, “Is My Non-Compete Clause Enforceable in Canada?” offers more detail on the subject.

How Can I Know If I Am an Employee or an Independent Contractor?

In our case study, “Are you an Employee, Independent Contractor, or Dependent Contractor”, We discuss the differences between employees and contractors. Though there is no definitive test to determine if you are one or the other, courts will look at the true nature of your employment to determine your employment status.

In most cases, independent contractors choose their own hours, determine their wage, and choose which projects they wish to work on. They have the freedom to choose when and how they wish to work but do not have the benefits that come with formal employment.

Why Should Employers Second Guess Non-Competes for Independent Contractors?

If you are an employer who is considering asking an independent contractor to sign a non-compete clause, you may want to think it through carefully. Your intentions of protecting your business through a non-compete clause will likely not be enforceable as an independent contractor essentially works for themselves. By choosing to hire an independent contractor you should expect that they have the right to obtain employment from other sources.

Beyond the non-compete clause likely being unenforceable for an independent contractor, you may also need to be mindful that having them sign a non-compete may affect their status as an employee. Treating an independent contractor as if they are employees but denying them the benefits of employment may result in penalties if the independent contractor or employee chooses to take the employer to court.

What Should I Expect as an Independent Contractor When It Comes To a Non-Compete?

If you are an independent contractor and are worried that you will be forced to abide by a non-compete clause, you probably should not worry too much. Independent contractors have more freedoms than traditional employees but also have fewer employment-related benefits and protections. It would be unlikely that a non-compete clause would be enforceable if you are an independent contractor as you are not an employee accepting an employment contract.

If you are being asked to sign and non-compete clause and are unsure if you are an independent contractor or an employee, getting the opinion of an employment lawyer may be helpful. A contract lawyer or non-compete lawyer can help you to understand your employment status as well as the enforceability of your non-compete clause. Consider booking a free consultation with Soni Law Firm. We are committed to helping you know and understand your rights as an employee and are ready to represent you at any stage of an employee-employer dispute.