Does an employee non-compete agreement apply to a non-employee independent contractor?
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Does an employee non-compete agreement apply to a non-employee independent contractor?
I am self-employed and am under a 1099 with a freight brokerage in KS, although I reside in NE. Since working under this company’s authority I have built a portfolio of business, but have signed a non compete agreement with them. The non-compete refers to it’s employees, not any outside independent contractors. I was also hired under the verbal agreement that any client base that I build while working with them would be mine. I have since been told that any and all of my customer base is now considered their personal property and if my customers would decide to continue doing business with me after I leave to go work under a different authority that allows me to build my business, that this
company has the right to take me and the new company to court. This company is not within the 50 mile radius stated in the non-compete, nor are my customers. What are my rights?
Asked on May 2, 2017 under Employment Labor Law, Nebraska
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 6 years ago | Contributor
1) The non-compete you signed would most likely apply to you, even though they used a non-compete which stated "employees" and you were an independent contractor. That is because such agreements are interpreted in a commonsense, logical fashion (as are all contracts): if they gave you this form to sign, it's clear that it was intended to cover you notwithstanding that it referred to employees, not contractors; and furthemore, except for tax and wage law purposes, nowadays, the line between employees and contractors is very blurred anyway. It is very likely that a court would enforce this agreemet against you.
2) If you are further than any geographic radius contained in the agreement, the non-compete would not apply; non-competes are generally strictly limited to the stated radii and/or durations.
3) However, you probably can't use the customer list you accummulated: generally, customer/client lists created while in the employ of company belong to a company in the absence of a written contract to the contrary. You can try to argue that the oral (that's the better term than "verbal") agreement gave you this list, but there is a good chance that a court will not find that persuasive and/or not find that you proved the existence of such an oral agreement which goes against common practice. It would be different if you had multiple employers and built the list for all of them--those facts would strongly suggest this was you list, since no company could lay claim to it. But if you just worked for the one company while doing this, the list would typically be taken to be their list, not yours.
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