An independent contractor non-compete agreement is a document that an employer or company uses to prevent its employees from working for a competitor or starting a similar business for a specific period. This period varies from one company to another and may range from six months to five years or even longer.
Defining an independent contractor: An independent contractor is an individual or a business entity that offers services or produces goods for another company based on an agreement. The contract dictates the relationship between the contractor and the company they are working for. The independent contractor has the freedom to decide how they will deliver the contracted goods or services.
When to use a non-compete agreement?
Any business that yearns to grow and make profits must invest in the right resources. Chief among these resources are the employees; these are the individuals who bring in the relevant skills needed to grow the business. In a bid to protect their investments, companies revert to non-compete agreements when hiring employees or other service providers.
This agreement hinders employees from working for a competitor for a specified period. The contract may also bar the employee from disclosing business secrets to competitors. According to the details in the non-compete agreement, the employee is forbidden from stealing customers or employees from their former employer to start their own business.
The main goal of the non-compete agreement is to ensure an employee benefits from the time and resources they use to train employees. After signing a non-compete agreement, an employee can’t transfer directly the skills they have gained from the employer to a competitor or start their business before the period specified in the contract.
The non-compete agreement may also be signed when businesses are sold; the document will hinder the business owner for starting a similar business after selling the former business to another company or individual.
What to include in an Independent Contractor Non-Compete Agreement?
Although non-competent agreements are written specifically for each employee, they contain some standard basic details. The non-compete agreement must have explicit terms and conditions. Important details that should feature in a non-compete agreement include:
- The name, date & signatures of both parties in the agreement
- Effective and expiry dates of the agreement
- Exclusions, limitations, and disclaimers for the independent contractor.
- Arbitration option
- Duration: The agreement must have a specific period when it’ll be effective. This period may range for six to five years. In rare cases, the period may extend up to 10 years.
- Scope: This means the agreement should specify the particular work, goods, or services in question.
- Geographical area: This refers to the mile radius where the agreement will be subjected to; this may be a town, city, county, country, state, etc.
Additional information that can feature in a non-compete agreement includes:
Competition: The employer may go ahead and define who their competitors are.
Damages: If the employee fails to adhere to the non-compete agreement, the employer can claim damages for the violation of the agreement. The non-compete agreement may contain this clause.