Are Non-Compete Agreements Enforceable for Independent Contractors?

Dec 12 2018

People commonly sign employment contracts to provide services without thinking critically about whether those contracts contain a non-compete clause. Employees hopefully know that they should be cautious about signing a non-compete, since it can greatly impact one’s future career opportunities.

If you are an independent contractor, rather than an employee, you may be wondering if a non-compete agreement is enforceable against you when you are not technically an employee. This is a great question, to which – unfortunately – there is no clear answer.

As a brief background, the enforceability of a non-compete agreement in Connecticut is based on a “reasonableness” standard. Under Connecticut law, the “reasonableness” of a non-compete restriction is based on five factors: (1) the restriction’s duration (i.e. length of time), (2) the restriction on geographic area, (3) the degree of protection given to the employer, (4) the degree to which the employee’s ability to pursue career opportunities is restricted, and (5) the interference on the public’s interest. Even one unreasonable factor is enough to make the non-compete unenforceable. Also, in general, a non-compete agreement that places no restriction on duration and/or location is likely unreasonable.

Whether a non-compete agreement is enforceable against an independent contractor remains unresolved in most states. For example, in Connecticut, there are no statutes or regulations addressing this issue; furthermore, courts have not formally defined an independent contractor as an employee (or not an employee) for the purposes of non-compete agreements. This means that courts have not created a formal rule that non-compete agreements apply (or don’t apply) to independent contractors. While there is some variation among Connecticut courts, the general trend is that courts typically evaluate an independent contractor’s non-compete agreement using the same five-factor standard. If you are an independent contractor, you should assume, therefore, that the non-compete agreement may be enforceable against you as if you were a regular employee.

Courts outside Connecticut have similarly avoided explicit rulings that non-compete agreements are automatically unenforceable against independent contractors. An Eighth Circuit case from 2017, Ag Spectrum Co. v. Elder, highlights the reluctance to create a blanket rule. In this case, Vaughn Elder sold Ag Spectrum products exclusively for several years until he ended the relationship in 2012 and became a competitor to the company. Ag Spectrum sued Elder for violating the non-compete agreement to which he had agreed years earlier. The district court ruled in favor of Elder, finding that the three-year non-compete agreement he entered with Ag Spectrum was not enforceable because he was an independent contractor, not an employee. Ag Spectrum appealed and, interestingly enough, the Eighth Circuit upheld the district court’s ruling — but it did so by applying a “reasonableness” test. By assessing “reasonableness” instead of agreeing with the district court’s ruling, the Eighth Circuit acknowledged that independent contractors may be bound by non-compete agreements.

At the end of the day, the enforceability of a non-compete agreement is situation-specific, whether you are a formal employee or an independent contractor. If you need help deciding whether to sign a restrictive non-compete agreement or if you are concerned a job you are considering accepting violates a current non-compete agreement, the Connecticut employment lawyers at Garrison, Levin-Epstein are here to help. Since each non-compete and each situation is different, your best course of action is to consult with attorneys well-experienced in the nuances of non-compete agreements and labor law.

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Our seasoned employment lawyers at Garrison, Levin-Epstein, Fitzgerald & Pirrotti, P.C. have decades of experience fighting for the rights of those affected negatively by non-compete agreements and other forms of discrimination, harassment, and retaliation. Contact us to learn how we can assist you.

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Are Non-Compete Agreements Enforceable for Independent Contractors?

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