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Independent Contractor Non-Compete Agreement Template

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AnĀ Independent Contractor Non-Compete is a document that protects a businessĀ that chooses to divulge sensitive information with another entity or individual. A non-compete states that any information shared (such as trade secrets, clients, employees, etc.) cannot be shared or used against the business in any way. The information is to be held undisclosed for a period of time. The independent contractor is barred from being able to be a competitor in the same business within the same market area.

Independent Contractor Non-Disclosure Agreement (NDA) – Often signed alongside a non-compete, this prevents the contractor from using any of the information learned from performing their work for their own use or for a competitor.

How to Use

A non-compete is used in the following scenarios:

  • An Independent Contractor has been provided with proprietary and confidential information and the employer wants to prevent the information from being shared with a competitor or other business owner.
  • The employer wishes to limit the ability of the Independent Contractor to solicit their employees or customers for a specific amount of time.
  • The business or entity is attempting to mitigate the risk of having an individual considered an employee.

Define terms and confidentiality

The terms of the Non-Compete must be reasonably written and not broadly documented in such a manner that could prevent the independent contractor from completing their trade. The agreement should include:

  • Name, date, and signature of parties involved.
  • Effective date and expiration date of the non-compete.
  • Limitations, disclaimers, and exclusions for the independent contractor (i.e., solicitation, contact with customers etc.).
  • Location of where non-compete is valid.
  • Clause advising of arbitration option.

Duration

Duration of the non-compete agreement is subject to local state law, if applicable. However, a non-compete agreement traditional lasts for one to two years. While allowable, it is rare for a non-compete agreement to last over ten years.

Geography

The Geography of the non-compete agreement must be documented and reasonable. The Independent Contractor may be limited to a location within the state (i.e., county or city) the work was done but the geographical area cannot be irrational. Factors that determine geographical area are; what services were provided, where clients or employees are located, and the criticalness of those services to the employers business.

What is an Independent Contractor?

An individual falls under the An Independent Contractor category (i.e., contractors, subcontractors, dentists, doctors, lawyers, etc.) if they provide goods or services but the payer has the right to direct or control the result of the work. The payer has no control over how the work will be done or what will be done. Furthermore, the Independent Contractor does not work regularly for an employer and the earnings of individual who falls under the An Independent Contractor category are subject to Self-Employment Tax as they are considered in business for themselves.


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