According to reports, more employers are hiring people as independent contractors rather than employees to avoid Obamacare, minimum wage requirements, or other laws that only protect employees. It is also being reported that federal and state agencies are intent on exposing and punishing employers who improperly classify employees as independent contractors. Since these reports are, in fact, very correct, there are a lot of employers with a lot of independent contractors who may find themselves subject to a lot of penalties for improperly classifying independent contractors.


As we all know, there is no one right answer for determining employee -v- independent contractor because each agency has its own multi-factor test and it’s very fact specific, etc.


BUT, employers MUST know that they CANNOT have their independent contractors sign a noncompete agreement because that is something that only an employee should sign! An independent contractor is supposed to work for other entities, usually at the same time as he/she is working for the employer. The independent contractor may work for the employer’s competitors because he/she specializes in a particular field and, guess what, the employer’s competitors in that field need the independent contractor’s specific expertise, too. You may, like any other company, be concerned that the independent contractor will obtain your proprietary information and run off to start a competing business or take it to a current competitor. If that is a real risk, then maybe the task that this person is performing for your company is simply not meant to be an independent contractor task. Anyone who is doing something for you that allows them to have that much access to such a critical and confidential part of your business is doing something that is too integral to your operations to be considered an independent contractor assignment.


Make your independent contractors sign a confidentiality agreement but do not put that noncompete in front of them if you want to keep that independent contractor status. Never. Ever.