Legal Question: Notice period & new development

In My Humble Opinion
1

I have a legal question about an independent contractor agreement. I know you are not my lawyer and I will talk to a lawyer as well but I just wanted general informed opinions.

Situation:

  • Independent contractor has a restrictive covenant not to compete with the owner within a geographical radius around owner’s locations. Owner has multiple locations and the contract says that covenant applies to all locations even if the contractor has not worked at some of them
  • Contractor gives notice of termination and is asked to continue to work during notice period

Questions:

  • If owner starts a new location during the notice period (at which location contractor will not work), will the covenant extend to the new location as well?
  • Is it legally enforceable for owner to prevent contractor from working close to any of their locations? It severely limits contractor’s livelihood since owner has many locations across many towns and counties.
2

IANAL, but I’ve heard such clauses are difficult to enforce specifically for this reason.

Obviously context and details matter. The term “contractor” is extremely vague. What kind of work is he/she actually doing?

3

The owner and contractor are both physicians.

4

Depends a LOT on which state you’re in. In some states non-competes are all but unenforceable. Others they’re treated like sold gold guarantees.

As physicians are a heavily regulated trade, your state licensing board may have something to say about this. There are public policy reasons to not let private contracts force workers out of certain geographical areas.

5

The state is Illinois. Any knowledge or experience dealing with these contracts in this state? Appreciate your responses.

6

Another factor to consider is how narrow the field may be - does this particular sub-field have a glut of practitioners, or is it highly specialized?

Also, is the independent contractor in a position to poach clients or utilize trade secrets & practices?

7

If the contractor signed the contract to gain work as a contractor, then they knew the terms and conditions of accepting the contract including the restrictive covenant. That’s what’s within the four corners of the page of the contract. In exchange for those restrictions, the contractor received compensation for their services.

Just because the contractor now exercises his notice, which I assume is also a provision of the contract, the contractor can’t just decide that they don’t want to live up to their side of the agreement, even if it limits the contractors livelihood. The contractor can work outside the territory agreed to under the contract.

Normally there are terms for restrictive covenants like this. Is there a time limitation in which the contractor is not permitted to compete against the owner? If it is in perpetuity, that normally can be challenged.

Always get counsel before signing contracts such as this. It’s easer to negotiate these types of terms when you are being hired than it is after the fact and you want out of a contract.

8

While this is true, certain states (mine included) also exercise a “reasonableness” clause. If I sign into a contract that prohibits me from flipping burgers at any fast food place in a 300-mile radius, even if my former employers decides to sue me on it, it would (most likely) be thrown out.

Now, if I sign a contract where I’m in a specialized field of sales, and my contract states that I can’t work in a certain field or speak with former clients for a limited time period, that would most likely hold up in court.

An employer would need to show harm / damages (at least in my state).