What Happens if I Hire a Contractor Who Has a Non-Compete Agreement?

A contractor is self-employed or employed by an outside agency.

Businesses often hire contractors from outside agencies or from the ranks of the self-employed to provide labor. Sometimes contractors require business clients to sign non-compete agreements that prohibits each business from competing with the contractor's business or agency.

Significance

A non-compete agreement protects the contractor's business and business plan.

A non-compete agreement protects the contractor's business or agency from being sidelined by competition from your business. It also prevents you from co-opting the contractor's business plan and contributions as your own. The agreement promotes an ethical business relationship between the contract worker and the business.

Considerations

Not all firms or self-employed contractors require non-compete agreements. It is important to consider whether the non-compete is too rigid for your business needs. If it impedes your business's creative growth, it may be best to hire a contractor with a less rigid non-complete clause or no non-compete clause at all.

Logistics

The contractor or an agency representative provides you with a copy of the non-compete form. Review it with the guidance of your business attorney. If the agreement is acceptable, acquire the necessary signatures and forward the completed form to your human resources division and to the contractor or representative.

Legal Responsibilities

Your business reputation and finances require that you respect the terms of a signed non-compete agreement. Failure to do so may result in damages awarded in a civil suit. Failure to abide by the terms also tarnishes your business reputation.

Other Uses

Your business may also use a non-compete agreement to protect its own business innovations and plans. Non-compete forms often prevent contractors from co-opting the business model or entering your business market. Simply require that the contractor sign your non-compete agreement before utilizing his labor.

References

• Business.gov: How - And When - to Use Non-Compete Agreements Appropriately
• America's Best Companies: Enforcing Your Non-Compete Agreements
• Harvard University: Abstract, Employee Non-Complete Agreements

Resources

• American Bar Association: Non-Compete Agreements