IC agreement says I can’t work for competitors for 2 years

I’m a freelance UX designer based in California. I’ve been doing contract work for a fintech startup and they just sent me a new IC agreement to sign. Buried in section 9 is a non-compete clause that says I can’t work for any “competing business” for two years after the contract ends.

Fintech is basically my whole client base. If I sign this, I can’t work for anyone in the space for two years? That seems insane. They are one of eight or nine clients I work with. Am I reading this wrong or is this actually enforceable in California?

You are reading it correctly, and no, it is almost certainly not enforceable. California Business & Professions Code section 16600 is one of the strongest anti-non-compete statutes in the country. It provides that “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.”

This applies to independent contractors as well as employees. AB 1076 (2020) and SB 699 (2023) reinforced this further. SB 699 specifically makes it unlawful for an employer to even attempt to enforce a non-compete against a California worker regardless of where the contract was signed.

The only narrow exceptions involve the sale of a business (where a seller agrees not to compete with the buyer) and certain partnership dissolution scenarios. A standard IC agreement non-compete does not qualify for either exception.

You can sign it and the clause would be void, or you can push back and ask them to remove it. Personally I would push back. Having a void clause in a signed contract can still create confusion and intimidation even if it is not legally enforceable.

I had a nearly identical situation last year. Client tried to slip a non-compete into an IC agreement. I flagged it, they said it was “just boilerplate,” and I told them to remove it or I would not sign. They removed it in about two hours.

These companies know the clause is void in California. They include it hoping freelancers will not read the contract or will be too intimidated to push back.

That’s really helpful, thank you. One follow-up: the contract also has a “confidentiality and trade secrets” section that is about three pages long. It basically says I cannot use any information I learn during the engagement to benefit a competitor. Is that different from the non-compete? Because it feels like it achieves the same thing.

Good catch, and yes, there is an important distinction. A non-compete restricts who you can work for. A confidentiality or trade secret provision restricts what information you can use or disclose. The latter is generally enforceable in California under the Uniform Trade Secrets Act (CUTSA) and the federal Defend Trade Secrets Act (DTSA).

However, the provision has to be reasonable and actually tied to legitimate trade secrets. If the confidentiality clause is so broadly written that it effectively prevents you from using general skills and knowledge in your field, a court might view it as a de facto non-compete and strike it down. The line between “protecting trade secrets” and “restraining someone from working” is where most of these disputes happen.

I would recommend having an attorney review the full confidentiality section. A three-page confidentiality clause in a freelance UX contract is unusually long and may contain overreach.

Also worth noting that if you are classified as an independent contractor, the company has even less justification for a non-compete. The whole point of IC status is that you are an independent business. Telling an independent business it cannot serve other clients in the same industry is a pretty clear contradiction.

Some companies use overly restrictive IC agreements as a way to get the control of an employment relationship without the obligations. If they are controlling who you can work for, that might also be a misclassification issue under AB 5.