Could Your Non-Compete Clause Get Your Freelance Business In Trouble?

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Back in 2011, Dr. Eric Eskioglu was sued by Lee Memorial Health System after performing neurosurgery to treat a brain embolism, a potentially life-threatening condition.

Why?

Lee Health, which was Dr. Eskioglu’s former employer, claimed that the doctor had violated his 50-mile-radius non-compete clause when he started his own practice just 35 miles away. This suit came about even though Dr. Eskioglu is one of maybe 30 doctors who can even perform this procedure.

A less extreme example of a non-compete clause being used to bar workers from gainful employment involved Jimmy John’s requirement that its employees not work for a competing sandwich shop for at least two years after leaving the restaurant chain. Eventually, JJ’s was sued for this practice, and the clause was removed from its contracts.

Non-compete clauses and you

If you’re a freelancer who is also employed, you might be performing the same services for your private clients as for your boss. It makes sense, after all, because many skills such as writing or programming are transferrable out of the regular, 40-hour/week job site. As a result, many full or part-time employees supplement their incomes by “moonlighting,” or doing work on the side.

However, many employers don’t take too kindly to this practice. In some cases, it makes sense, such as when a freelancer works directly with a company’s competitor and even shares sensitive corporate information with that competitor.

However, in other cases, the fear doesn’t make sense. Case in point: a major healthcare software provider in the Madison, Wisconsin area told me during my tech writer job interview that I could not do any kind of paid work outside of my employed work. Yes, you heard that right: No outside work whatsoever, even if that work didn’t relate to healthcare.

Why? The explanation I received was that the company wanted its employees to be focused only on their jobs, and any extracurricular work would “potentially threaten patient care.”

If you freelance on the side, don’t assume that your work won’t get noticed by your employer. Over half of the employers surveyed by CareerBuilder admitted to checking potential employees’ social media accounts before hiring them. According to Business News Daily, at least 30% of employers continue to check on employees’ social accounts even after hiring them. All you need is one casual mention of staying up late to finish a blog post or wrap up some code before your extracurricular work activities become public knowledge.

So, how do you walk the tightrope of being an employee and a freelancer without getting into legal trouble?

1. Read your work contract’s fine print.

If it’s been a while since you’ve perused your employment contract, take the time to obtain a copy and read over it very carefully.

Non-Compete clauses typically state that you will not work for a competing employer/client for the space of one to two years following your termination with your current employer. However, there could be sub-clauses to this clause that also stipulate geographic area and/or involve distributors, suppliers or clients of the competing employer/client. These sub-clauses could severely limit your freelance work opportunities.

2. Strike down or limit your non-compete clause.

If you’re about to get hired, you are in the best possible position to bring up the non-compete clause with your prospective employer and argue that it be removed or limited. Emphasize that you’re not out to help competitors; rather, you need to be gainfully employed once your current employment contract with your hiring company runs its course.

Many employers protect themselves with intellectual property and/or non-disclosure agreements instead of non-compete agreements. Find out if your potential employer would agree to these statements being placed into your contract in lieu of the non-competition one.

You can also ask to limit the scope of a broadly-drafted non-compete clause to cite specific competitors, terms and/or territories. Having this type of discussion and debate up-front, when both parties are amicable, is far better than later on, when costly litigation erupts.

3. Carefully consider that non-compete clause.

What if your prospective employer won’t budge on the non-compete clause? You should then carefully consider what you stand to lose -or gain- in terms of future business if you sign that contract.

For example, you might not be able to launch a full-time freelance writing business in the healthcare field until two years post-termination from your employed position. Alternately, you might be forced to move to another city if your non-compete clause stipulates that you and your ex-employer can’t both work within a given distance.

On the other hand, if your private clients thus far have been low budget and/or one-off projects that only generated some pocket change for you, you could just sign that employment contract. Also, your prospective employer might have connections to high-level distributors and suppliers who would be of immense use to you even if you had to wait two years before contacting them.

4. Walk away.

If you don’t feel good about signing over your freelancing potential to your prospective employer, then don’t. It’s better to walk away from a contract then to later be limited by your contract terms or end up in court.

In the long run, you’re far better off developing your skill set and becoming attractive to other potential employers and clients rather than tying yourself to a single employer who limits your potential.

Clauses: The ties that bind – and restrict

As a full, part-time or even occasional freelancer, you are best served by employers who, within reason, don’t place restrictions on your work. Non-compete clauses, as a result, can affect your work and earning opportunities long after you’ve left your employer. So, before you sign on that dotted line, know what you are agreeing to do…and to not do.

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