Breach of Contract
'' I have a small business that requires hiring independent contractors. I have had all of my contractors sign an agreement that they pay their own taxes; they receive work from me; they have agreed to a no compete clause stating they will not direct or indirectly solicit or divert from or attempt to convert any firm, person or entity, any customer, any prospective customer, customer list, marketing aid, method, investor, employee or property of my company. My question to you is this form was signed by a contractor that is no longer working for me and myself and dated. No witnesses other than the fact all of my contractors sign the same one. If they solicit one of my customers what legal options do I have? I live in Kansas but figure most states would have the same opinion of this contract as it is one I have signed for the companies in a variety of states that I work for.''
2 Answers from Attorneys
Re: Breach of Contract
Your company may very well have a cause of action for breach of contract and/or tortious interference with contractual relations. Covenants not to compete must be reasonable in terms of time and geography before they will be enforced. Please feel free to call 913 491-2855 should you wish to further discuss your situation.
Re: Breach of Contract
Depending upon the wording of the Non-Compete the former Ind. Contractor signed, you may be able to file suit against the individual for breaching the Non-Compete as well as obtain an injunction against the former Ind. Contractor prohibiting he/she from soliciting your customers.
As an important aside, with a true non-compete, you should consider changing the language of the agreement so that it is line with KS and federal law regarding Ind Contractors. Otherwise, you open yourself up to the possibility that the IRS or State of KS would classify these Ind Contractors as employees (and hit you with a hefty payroll tax penalty, including interest). A true non-compete is indicative of an employer/employee relationship, not an Ind. Contractor relationship. However, there are ways in which you can protect yourself without opening yourself up to liability as a potential employer. Small business employers run into this problem more than any other employment problem as they tend to walk a thin line between employees and Ind. Contractors in an attempt to keep payroll expenses and overhead at a minimum. I highly recommend you have a small business attorney review your Agreement to see what revisions might be necessary. If you would like assistance, feel free to give me a call.
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