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Independent Contractor Agreement with Covenant Not to Compete

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Contract with Independent Contractor with Covenant Not to Compete

Independent Contractor agreement made on the (date), between

of , referred to herein as Contractor, and , a corporation organized and existing under the laws of the state of , with its principal office located at , referred to herein as Employer.

Whereas, Employer owns and operates a at the address set forth above, and Employer desires to have the following services performed at Employer's place of business (general description of type of services for which Employer is contracting with Contractor) ; and

Whereas, Contractor agrees to perform these services for Employer under the terms and conditions set forth in this Contract.

Now, therefore, for and in consideration of the mutual covenants contained in this agreement, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

1. Description of Work

The work to be performed by Contractor includes all services generally performed by Contractor in Contractor's usual line of business, including, but not limited to, the following:

(detailed description of work to be performed)

2. Payment

Employer will pay Contractor $ for the work to be performed under this contract, according to the following schedule: (Set forth schedule) .

3. Relationship of Parties

The parties intend that an independent contractor-employer relationship will be created by this Contract. Employer is interested only in the results to be achieved, and the conduct and control of the work will lie solely with Contractor. Contractor is not to be considered an agent or employee of Employer for any purpose. Employer is not responsible for withholding, and shall not withhold, FICA or taxes of any kind from any payments which it owes Contractor, and the employees of Contractor are not entitled to any of the benefits that Employer provides for Employer's employees. It is understood that Employer does not agree to use Contractor exclusively. It is further understood that Contractor is free to contract for similar services to be performed for other employers while under contract with Employer.

4. Employees of Contractor

Contractor shall be solely responsible for paying its employees. Contractor shall be solely responsible for paying all FICA and other taxes, workers' compensation, unemployment compensation, medical insurance, life insurance, paid vacations, paid holidays, pension, profit sharing and other benefits for the Contractor and his employees, servants and agents.

5. Liability

The work to be performed under this Contract will be performed entirely at Contractor's risk, and Contractor assumes all responsibility for the condition of tools and equipment used in the performance of this Contract. Contractor will carry, for the duration of this Contract, public liability insurance in an amount acceptable to Employer. Contractor agrees to indemnify Employer for any and all liability or loss arising in any way out of the performance of this Contract.

6. Duration

Either party may cancel this Contract on days' written notice; otherwise, the Contract shall remain in force for a term of (specify period of time, e.g. weeks, months or years) from the date hereof.

7. Covenant Not to Compete

Contractor agrees that, for a period of (e.g., two) years following the termination of this Agreement, Contractor will not directly or indirectly:

A. Perform any similar services for any person or firm engaged in the business of (specify business) in County, (state).

B. If any restriction set forth in this Section 6 is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable.

C. The restrictions contained in this Section 6 are necessary for the protection of the business and goodwill of the Employer and are considered by Contractor to be reasonable for such purpose. Contractor agrees that any breach of this Section 6 will cause the Employer substantial and irrevocable damage and therefore, in the event of any such breach, in addition to such other remedies which may be available, the Employer shall have the right to seek specific performance and injunctive relief.

8. No Waiver

The failure of either party to this Agreement to insist upon the performance of any of the terms and conditions of this Agreement, or the waiver of any breach of any of the terms and conditions of this Agreement, shall not be construed as subsequently waiving any such terms and conditions, but the same shall continue and remain in full force and effect as if no such forbearance or waiver had occurred.

9. Governing Law

This Agreement shall be governed by, construed, and enforced in accordance with the laws of the State of .

10. Notices

Any notice provided for or concerning this Agreement shall be in writing and shall be deemed sufficiently given when sent by certified or registered mail if sent to the respective address of each party as set forth at the beginning of this Agreement.

11. Mandatory Arbitration

Any dispute under this Agreement shall be required to be resolved by binding arbitration of the parties hereto. If the parties cannot agree on an arbitrator, each party shall select one arbitrator and both arbitrators shall then select a third. The third arbitrator so selected shall arbitrate said dispute. The arbitration shall be governed by the rules of the American Arbitration Association then in force and effect.

12. Entire Agreement

This Agreement shall constitute the entire agreement between the parties and any prior understanding or representation of any kind preceding the date of this Agreement shall not be binding upon either party except to the extent incorporated in this Agreement.

13. Modification of Agreement

Any modification of this Agreement or additional obligation assumed by either party in connection with this Agreement shall be binding only if placed in writing and signed by each party or an authorized representative of each party.

14. Assignment of Rights

The rights of each party under this Agreement are personal to that party and may not be assigned or transferred to any other person, firm, corporation, or other entity without the prior, express, and written consent of the other party.

In this contract, any reference to a party includes that party's heirs, executors, administrators, successors and assigns, singular includes plural and masculine includes feminine.

WITNESS our signatures as of the day and date first above stated.

(Name of Employer)

By:

()

()

()

()

Enter text✕

What this Independent Contractor Agreement with Covenant Not to Compete covers

An Independent Contractor Agreement with Covenant Not to Compete is a contract establishing an independent working relationship while restricting the contractor from competing with the hiring party for a defined period, within specified geography, or with particular clients or business lines. It sets payment terms, deliverables, project scope, intellectual property assignment, confidentiality, termination rights, and remedy provisions. The noncompete clause limits certain post-engagement activities and should be narrowly tailored to be reasonable in scope, duration, and geography to improve enforceability under applicable state law and federal standards.

Why use a covenant-not-to-compete clause in contractor agreements

Including a clear covenant not to compete protects trade secrets, client relationships, and goodwill while documenting responsibilities and compensation. When narrowly drafted and supported by consideration, it helps preserve business value and reduces post-engagement disputes, provided you follow state law constraints and drafting best practices.

Why use a covenant-not-to-compete clause in contractor agreements

Who typically prepares and signs this agreement

The agreement is used by companies that engage external contractors and by experienced contractors evaluating restrictions.

  • Hiring companies and startups protecting clients and IP while using outside expertise.
  • Independent contractors and consultants negotiating scope, pay, and post-engagement restrictions.
  • Corporate counsel, HR, and contracting teams who draft, review, and approve final language.

Use counsel or a contracts specialist when enforcing or negotiating restrictive covenants to align terms with state-specific law.

Core components to include for a professional agreement

A complete Independent Contractor Agreement with Covenant Not to Compete should be precise about parties, scope, compensation, deliverables, and the narrow noncompete elements to improve enforceability while addressing IP, confidentiality, and termination.

Parties

Full legal names and business entity types for each party, including tax identification where applicable and the contractor’s business address for service of notices.

Scope of Work

Detailed description of tasks, deliverables, milestones, and acceptance criteria so the agreement distinguishes contractor services from employee duties.

Compensation

Fee structure, payment schedule, reimbursable expenses, invoicing procedures, and any milestone or performance-based payments.

Noncompete Clause

Clear geographic limits, duration, and prohibited activities; narrowly tailored language increases the chance of enforcement under state law.

IP & Assignment

Explicit assignment of work product and copyrights to the hiring party, and definitions for preexisting IP and license back, if any.

Termination & Remedies

Right to terminate for convenience or cause, notice periods, post-termination obligations, and remedies including injunctive relief.

Essential data fields required in the agreement

Party Names: Full legal names
Addresses: Street, city, state, ZIP
Effective Date: MM/DD/YYYY format
Compensation: Dollar amount or schedule
Term Length: Start and end period
Signatures: Typed or handwritten date

Penalties and legal risks from a flawed agreement

Unenforceable Covenant: Court may refuse enforcement
Civil Liability: Damages and fees exposure
Tax Withholding Risk: Misclassification penalties
Confidentiality Breach: Loss of trade secret protection
Contract Ambiguity: Increased litigation likelihood
Regulatory Noncompliance: Industry-specific fines

Common drafting and execution mistakes to avoid

  • Overbroad geographic or temporal restrictions that exceed what courts view as reasonable, increasing the chance a court will void the covenant.
  • Failure to specify consideration or additional compensation tying the covenant to tangible benefit for the contractor.
  • Vague scope descriptions that blur contractor duties with employee responsibilities and create misclassification risk.
  • Missing or mismatched signature blocks, dates, or party names that can render the document ambiguous or unenforceable.

Step-by-step: completing the agreement correctly

Follow this sequence to complete the Independent Contractor Agreement with Covenant Not to Compete and reduce execution errors.

  • 01
    1. Identify Parties: Enter full legal names and entity types for each party.
  • 02
    2. Define Scope: Describe services, deliverables, and milestones clearly.
  • 03
    3. Add Consideration: Specify fees, payment timing, and expense reimbursement.
  • 04
    4. Sign and Date: All parties sign and date in MM/DD/YYYY format.

Routing and next steps after agreement execution

After signatures, route copies to stakeholders and store per your records retention policy, and follow any post-signing onboarding or IP assignment steps.

  • Deliver Copies: Send countersigned PDFs to all parties and custodians.
  • Onboard Contractor: Complete access provisioning and NDA acknowledgements.
  • Recordkeeping: Save executed agreement to secure records system.
  • Enforcement Prep: Log key dates for post-termination obligations.

Configuring an online signing workflow for this agreement

Set up fields and signer order to ensure legal validity and a clear audit trail when using an eSignature service.

Field Configuration
Signature Block Required for each party; include date field
Initials Place near key clause pages to confirm review
Attachment Request Use for W-9 or certificates of insurance
Signer Order Sequential to capture countersignatures

Digital signing and platform considerations

Ensure the provider complies with ESIGN and UETA, offers tamper-evident PDFs, and can retain signed records for your retention schedule.

  • File Formats: PDF and DOCX supported
  • Auth Options: Email, SMS, KBA when needed
  • Integrations: CRM and cloud-storage connectors

eSignature vendor pricing and feature snapshot for executing contractor agreements

Compare common vendor price points and key capabilities relevant to executing and storing signed Independent Contractor Agreements with Covenant Not to Compete; signNow is listed first per vendor ordering rules.

signNow DocuSign Adobe Sign PandaDoc HelloSign
Starting Price $8/user/mo $15/user/mo $14/user/mo $19/user/mo $15/user/mo
Free Trial 7-day free trial Varies by plan Varies by plan Yes, limited Yes, limited
Bulk Send Yes Yes Yes Yes Yes
Audit Trail Yes Yes Yes Yes Yes
HIPAA Compliant Yes Yes Yes No No

Frequently asked questions and practical answers

Answers cover enforceability, eSigning, notarization, platform issues, and practical next steps when working with this agreement.


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