Independent Contractor Non-Compete Agreement

When and Why It’s Used

Businesses commonly use non-competes with contractors when:

• The work involves sensitive client data or internal systems
• Trade secrets or intellectual property are shared
• The contractor plays a key role in product development, marketing, or business strategy

This agreement helps ensure that contractors can’t immediately turn around and use insider knowledge to benefit a competing business.

Key Elements to Include

1. Scope of the Non-Compete
   Clearly define whether the restriction applies to the entire industry or specific competitors. For example, the contractor may be barred from working with direct competitors only.
2. Period (Term)
   Specify how long the non-compete will be in effect after the contract ends. Most states allow durations between 6 months and 2 years, with up to 5 years in specific industries or executive-level roles.
3. Geographical Limitations
   The agreement should define a reasonable geographic boundary—such as a 50-mile radius from your primary place of business or client base—where competition is prohibited.
4. Consideration (What the Contractor Receives)
   To be enforceable, there must be an exchange of value. For example, the opportunity to work on the project, monetary compensation, or access to proprietary tools or platforms.
5. Remedies for Breach
   Include language outlining the consequences if the contractor violates the agreement, such as legal action or financial penalties.

Is It Enforceable?

Generally, non-competes are enforceable with independent contractors, provided they are reasonable in scope, duration, and geography. However, these agreements are not enforceable in:

• California
• North Dakota
• Oklahoma
• Washington, D.C.

Outside these jurisdictions, courts typically consider whether the agreement protects legitimate business interests and is not overly restrictive.