Can Independent Contractors Sign Non-Compete Agreements?

More and more these days, companies are classifying their workers as independent contractors. This tactic is used for a myriad of reasons, including efforts to avoid the costs of Obamacare, to evade minimum wage or overtime requirements, and/or so the companies do not pay employer taxes and benefits.  While the line between an independent contractor and an employee is sometimes murky, many courts have concluded that it is legally inconsistent for a worker to be required to sign a non-compete and at the same time be classified as an independent contractor.  The reasoning of these court decisions is that only employees can be restricted from working for other companies in the same line of work.  The very essence of an independent contractor is that he or she has the freedom to choose who to work for.  Workers who are required to sign a non-compete and are classified as independent contractors should consult with an experienced employment attorney immediately, as two possibilities may be likely.  Either the worker:

  1. is truly an employee (based on a number of factors intended to measure the level of control exercised by the company over the worker), in which case the worker would be entitled to unpaid overtime, or
  2. is really an independent contractor, in which case the non-compete agreement may be unenforceable.  In a federal court decision, the district court found that that non-compete agreements that prevented maids from working for competing providers for one year following termination suggested that they were not independent contractors. Harris v. Skokie Maid & Cleaning Service, Ltd., 2013 WL 3506149, at *5 (N.D.Ill.2013).

The court rejected the notion that the defendant could designate maids as independent contractors—who would normally be free to utilize their skills in an open market—while simultaneously restricting that very ability.   Other federal courts have likewise noted that non-compete agreements are inconsistent with independent contractor status.  Swinney v. AMcomm Telecomm., Inc., 30 F.Supp.3d 629 (E.D.Mich.2014).

The upshot of this is that if you are classified as an independent contractor and required to sign a non-compete (or any other agreement which restricts your right to work for other companies), you should seek counsel from an employment lawyer as soon as possible to learn about your legal rights.

About the Author: I represent individuals in a variety of matters, including employment claims for unpaid overtime.  While my office is located in Fort Worth, I am admitted to practice in every state and federal court in Texas, and I am able handle unpaid overtime cases in Dallas, Houston, Midland, Tyler, San Antonio, and across Texas.  If you believe you may be owed unpaid overtime or have questions regarding whether you are an independent contractor or an employee, call me at 817.908.9861 for a free and confidential consultation or fill out my contact form for a free evaluation.

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