Contract Conundrum: Should You Sign a Non-Compete Agreement?
Freelance employment contracts often make for dull, dry reading. It can be tempting to skip poring over the details and simply sign on the dotted line, so you can get to work — and start earning money as quickly as possible.
Resist the temptation. Some contacts contain a few sentences that could prevent you from doing similar work for other clients in the future. That verbiage is known as a non-compete clause, and understanding what it means could be key to your success in the freelance market.
To Compete or Not to Compete?
A non-compete clause is designed to protect the intellectual property and client connections that can keep a company in business. In most cases, non-compete clauses contain a specific set of restrictions. Some specify a time period after a contract ends in which a former employee
or freelancer may not contact the company’s customers or engage in the same kind of work for a competitor. Many also outline geographic restrictions, ensuring that former partners or vendors won’t open up a business near the organization they’re working for.
“Employers regularly attempt to [use] non-competition clauses in employment and independent contractor agreements,” says Kevin Parks, owner of Parks Law Offices in Portland, Ore. In fact, some companies use boilerplate contracts for everyone — employees and freelancers — and once you sign, you’re locked into the terms that contract contains.
Making Sense of It All
Few freelancers have time to take classes in contract law or keep up with ever-changing legislation. But, ignoring the specifics could be dangerous, Parks says.
“If you’re presented with a contract and you don’t fully understand all the included terms and their possible implications, you should absolutely consult with an attorney [who can] review the agreement, answer any questions you may have, and advise you of any potential issues,” he says.
“In short, you should be looking to fully understand what the contract does, or purports to do, and also what potential limitations and liability you may have.”
Legal advice like this isn’t free, of course, but the costs involved may not be prohibitive. “A simple review of a contract and a meeting with a client can often take as little as an hour or two. ... Many attorneys can also provide a written opinion letter outlining the various issues and providing a legal analysis, though that typically requires a few additional hours of time,” Parks says.
“Whether or not such a cost is worth it typically depends on your specific set of circumstances, though the cost is relatively minor compared with defending against a civil breach of contract lawsuit,” he adds. “As they say, ‘An ounce of prevention is worth a pound of cure.’”
Jean Dion is a business writer for Intuit and is passionate about solving small business problems.