This article was updated on September 25, 2018.
When you hire a freelancer, you need to take precautionary measures to protect your company's confidential information. After all, once your contract with a freelancer ends, he or she could potentially share this information with your competitors, providing them with the opportunity to woo your clients. One possible solution is to require noncompete agreements for freelancers.
How Do Noncompete Agreements Work?
A noncompete agreement is a contract in which a freelancer agrees to certain restrictions on the work he or she can do after your project ends. If the freelancer breaks the terms of this agreement, you can sue him or her for breach of contract.
According to Quintessential Careers, noncompete agreements can prevent freelancers from working in certain geographical locations and using certain skills, roles and services with competitors.
A noncompete must have an expiration date to establish a specific time frame during which the restrictions apply. For example, if a florist hires a freelance web designer to create her website, she may require that this freelancer does not design websites for other florists in the same city over the course of the next year.
Benefits and Drawbacks
When you're contemplating the role that noncompete agreements should play in your business, it's important to remember that these contracts only hold true if freelancers agree to your terms. Since freelancers work with a wide range of clients, they may be very reluctant to limit their future career options. As such, you may drive away valuable talent by putting a strict noncompete agreement into place. A freelancer may even demand a higher fee to make up for the income that he or she may lose down the line due to these restrictions.
Furthermore, if your noncompete is too strict, the freelancer could later challenge the entire agreement in court. As such, it's crucial for you to ensure that everything in your agreement has a clear business justification, which may include protecting trade secrets or your current customer base. Perhaps most importantly, you must assert that your noncompete does not block the freelancer's ability to make a reasonable living, according to Monster.
Reaching a Fair Solution
If you are going to use noncompete agreements for freelancers, they need to be as specific and limited as possible, while still offering you the necessary protections. In the end, you may need to compromise. For example, instead of blocking a freelancer from your entire industry, your noncompete could just cover your main competitors.
Another option is to use a nondisclosure agreement instead. While this particular type of agreement does not prevent freelancers from working with competitors, it does prevent them from revealing confidential information about your organization, as Forbes reports. These restrictions are not as stiff, so you may have an easier time getting freelancers to agree to this type of arrangement.
By keeping this information in mind, you can come up with a fair contract that protects your business while still keeping your freelancers happy. When in doubt, seek legal counsel for your particular circumstances.