Under Utah law, an employer generally cannot bind an independent contractor to a non-compete agreement, and attempting to do so carries legal and practical risks.
An independent contractor operates a business that is free from the control and direction of the hiring party and able to perform work for multiple clients.
A non-compete would restrict an independent contractor’s control over business decisions and would restrict the independent contractor’s ability to work for multiple clients.
Thus, hiring an independent contractor is, by definition, incompatible with the use of a non-compete agreement.
Risks to the Employer
If an employer tries to enforce a non-compete against an independent contractor, they face multiple risks, including:
- Misclassification liability
- Imposing control (like a non-compete) may convert the independent contractor into an employee under Utah law, triggering liability for back taxes, benefits, and wage law violations.
- Unenforceability
- Courts may void the agreement as an unreasonable restraint of trade, especially if there is no protectable business interest or the contractor provides general services.
- Damages & Fees
- An unenforceable non-compete may result in damages or attorney fee awards to the independent contractor.
- Reputational Harm
- Attempting to enforce an unreasonable restriction on independent contractors can deter other contractors and reflect poorly on the business.
Best Practice Instead
Rather than attempting to use a non-compete agreement when hiring independent contractors, employers with protectable interests should consider using non-disclosure agreements to protect confidential information, and non-solicitation clauses to prevent active poaching of clients or employees.
If you need help with identifying employees vs. independent contractors, or with drafting non-disclosure and non-solicit agreements, give us a call!
