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Law Educator, Esq.
Law Educator, Esq., Attorney
Category: Employment Law
Satisfied Customers: 118635
Experience:  20+ Years of Employment Law Experience
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For the new year I was told that in my company would be

Customer Question

For the new year I was told that in my company would be switching us over from employees to independent contractors. I had signed a non-compete in my previous employee contract and in this new contract there's also a non-compete for this independent contractor. I was under the impression that non-competes do not work with independent contractors and if that's the case since they are hiring me now as an independent contractor (with the same company) would my non-compete from when I was an employee still be in effect since I am still working for the same company but now as an independent contractor?
JA: Because employment law varies from place to place, can you tell me what state this is in?
Customer: I live in Virginia and the company is based in Maryland
JA: Has anything been filed or reported?
Customer: In what respect? We have been given a termination letter, a sepration agreement to sign and then a new contract to hire us as independant consultants Theres been money issues in the company already and I suspect theyre trying to skate taxes honestly
JA: Anything else you want the lawyer to know before I connect you?
Customer: I do have digital copies of my prior contract and the documents they want us to sign now - Which they gave us at 5pm on Friday and told us to sign no later than 12/31/16
Submitted: 9 months ago.
Category: Employment Law
Customer: replied 9 months ago.
This is additional information: We had a meeting on Thursday informing of changing our employee contract. The process is changing us from an employee of the company to self-employed contractors. Why do I have to sign an "termination" letter? They claim it is so they can transfer me over to an "independent contrator" but it seems weird since its an termination at will state.
The real reason they are doing this is because now they do not have to pay the additional SS tax of 7.65% and also will not have to provide workers comp for us. They tried to play this off as a good thing and even offered a 5.00 bonus a day. There is no way this additional 5.00 a day will compensate for the tax increase. It also does not even consider the bookkeeping aspect the employee needs to do quarterly.
I email the owner asking if they were going to compensate us for this additional fee and the owner of the company tells me that he needs to get in contact with the accountant to "check on some things". I am sure he knew what he was doing but I called him out on it. Today I was told they decided to offer us 10 dollars more per day to compensate for this. The way they explained it away was that we were going to be changed to a higher position in our job even though it never existed before.
We were sent a termination of our current job contract, a new contract with our pay, etc to sign. This contract stated we should consult an attorney even though they sent this new contract out at 430 PM on Friday. It required us to sign this contract by the end of the day Saturday.
This gives us ~24 hours, on a non-business day/holiday weekend to try and find an attorney to review our contract. It seems they are strong arming us into signing this contract and strategically sent it out on the end of the business day on a holiday weekend. The contract even states we should contact an attorney to look over the contract before signing.
Questions: Can they give us this short of time to review a contract and sign it?
Are there any other things this company should provide for a “self-employed contractor” if they are “employing” us?
Are there any other glaring issues that may be here?
In our prior contract, we had a “non-compete” section that prevented us from working for a competitor for 2 years after leaving the company. Does signing a termination of employment/contract release me from say applying at a competitor?
EDIT: So this is what they sent me.
Position Termination Notice. This is a standard letter that is provided to notify you of your termination of your current direct employment status.
Separation Agreement and Release. This is a standard agreement that provides all the legal information concerning the end of your direct employment status.
Independent Contractor Agreement. This is your new contract for 2017.
Customer: replied 9 months ago.
Also I can upload the contracts that I have been given as well as my previous one
Customer: replied 9 months ago.
here are the new contracts
Customer: replied 9 months ago.
This is the contract I was previously under
Customer: replied 9 months ago.
Update to a prior post but my situation is for the new year I was told that in my company would be switching us over from employees to independent contractors. I had signed a non-compete in my previous employee contract and in this new contract there's also a non-compete for this independent contractor. I was under the impression that non-competes do not work with independent contractors and if that's the case since they are hiring me now as an independent contractor (with the same company) would my non-compete from when I was an employee still be in effect since I am still working for the same company but now as an independent contractor?
Expert:  Law Educator, Esq. replied 9 months ago.
Thank you for your question. I look forward to working with you to provide you the information you are seeking for educational purposes only.

Non-compete agreements are enforceable in MD and VA against independent contractors if the independent contractor agrees and signs such a contract. As long as the non-compete is reasonable as to the scope of protection, reasonable in time (12 months is typically reasonable) and reasonable in geographic scope where the company does business, the clause could be enforced against you.

My biggest concern is if you are doing the work of the company and they are directing your performance and can fire you at will and providing you equipment and parts to do your work and exercising control over your work, it is likely this alleged conversion to independent contractor is invalid and they are trying to misclassify you. Furthermore, I would not in good conscience tell anyone to sign agreeing that they would waive their rights to claim benefits being offered to employees if the contract is found unlawful or invalid. The biggest issue with this contract though would be that it seems as though there is a misclassification going on.

They are seeking to also make you voluntarily terminate your employment so if they terminate your IC agreement you cannot go back and claim unemployment against them because you voluntarily left the employment to go work as an IC.

I mean, if you need this job, you could be forced to take it, but quite honestly from reading these agreements it seems like they are trying to misclassify you to avoid paying SS and benefits and paying for workers compensation and if you have choices, you should consider exercising them.

The prior non-compete would remain valid for the protected period as well if you do not take the IC agreement and you could not compete with the employer for that period of time and that would be enforceable.


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Customer: replied 9 months ago.
Thank you for your response. The contractor is Oracle and the company I worked for will be paying for my travel, per diem per day and any expenses. They also have provided computers (through Oracle) to use to complete the work. Does this fall under misclassification? I am concerned about the contract stating that if any part of this contract is found to be unenforceable the other parts will remain intact. What I really wanted to do is work for a different company with the same contract with Oracle located in MA instead of MD without having them try to come after me but it seems that may not be possible. If I were to want to try and work for them until I find a different job, would there be any requests you hypothetically suggest to ask for alterations to the contracts? Also under my prior contract I was offered a bonus for completion of my training which I finished in the middle of December and another one 6 months after. The owner in email has said that I would receive these bonuses but that's it. Should I ask that it is as well added? I assume that the only way I could get out of this company would be to refuse to sign these papers and technically wait 2 years for my non-compete to expire. If I am being misclassfyed and found to be so would that nulify anything in the contract?
Customer: replied 9 months ago.
Is it reasonable to ask to be relieved of the non-compete if they are not working me a reasonable amount of time? They have been utilizing me about 20% of the month with promises or more work. As an independent contractor it would seem that I would be allowed to seek other jobs if its affecting my income - is this true?
Expert:  Law Educator, Esq. replied 9 months ago.
Thank you for your reply.

Without doing an in depth job review, it sounds to me like this is a misclassification, yes. If you sign that agreement even if you are found to be misclassified, you would not nullify the remaining clauses of the contract, which is what I was saying above.

I would suggest seeking to transfer to MA if that is what you want to do, which should not be a violation of the non-compete. However, it seems like this whole contract is just an attempt to avoid SS and unemployment and workers compensation.

As an IC you can seek other work, just not competing work with your company. But it is reasonable to ask for a release so you can seek additional work.
Customer: replied 9 months ago.
Does this separation agreement which has changed my non-compete from 24 months to 12 months nullify my prior contract with them? It seems odd that my prior contract had 2 years and now this separation agreement has 1 year. So if a different company that has the same contract with Oracle - which is located in MA instead of MD might be able to get me out of the non-compete since techincally its not a "local" competitor?
Expert:  Law Educator, Esq. replied 9 months ago.

If you sign the separation agreement, then the non-compete would be 12 months now. Yes, that is true, you may be able to get out of the non-compete if you leave the geographic area.