In April 2024, the Federal Trade Commission (FTC) announced a change that affects a whopping 30 million people in the United States. 

Non-competes are officially banned. 

This ban applies to all work in the United States – whether you’re an employee, freelancer/independent contractor, intern, or volunteer – paid or unpaid. 

For the longest time, there was a battle between NDA vs non-compete agreements. 

The two terms were often used interchangeably, but they are vastly different. And one of them would send a shiver down your spine if you were ever asked to sign it. 

Because, as a freelancer, a non-compete agreement could seriously damage your business growth because it operated counter to how you make your living. 

That’s why I’ve always recommended that if you were ever asked to sign a non-compete… 

You don’t. 

Here’s what you should know about why non-competes were detrimental to your business. 

(And why the FTC has officially banned them.) 

**Real quick before we jump in: 

Everything I share is legal education and information. It’s not business, financial, or legal advice, and it doesn’t create an attorney-client relationship between us.**

Non-Compete Agreements were never a freelancer’s friend

I get that everyone is out here trying to protect themselves. (I’m an attorney who works with online business owners – I really get it.) 

And that’s why I’ve never recommended non-compete clauses to freelancers. 

Or the business owners they work with. 

The Department of Labor has now successfully banned them nationwide. 

That’s because most non-compete agreements: 

  • Limited opportunities 

Freelancers typically work within specific industry niches. Non-compete clauses were used to prevent you from working with anyone in the same (or similar) industries you were currently engaged in.  

This seriously limited your ability to take on new projects and find work. 

  • Resulted in lost income  

Depending on the time period a non-compete covered, you could end up with large gaps between projects or a reduction in available work. 

  • Restricted your experience and portfolio-building  

A non-compete clause could effectively limit the type of projects you were allowed to include in your portfolio, making it harder to demonstrate your capabilities and attract new clients. 

  • Could harm your client relationships and reputation  

A non-compete clause could isolate you from your networks and prevent you from working with existing clients on future projects. It’s not hard to imagine how this could lead to potentially strained client relationships and missed opportunities. 

So given how harmful non-competes could be – and the fact that they’re now banned – how do business owners protect their businesses now? 

They set up an NDA.

NDA vs. Non-Compete: NDA (Nondisclosure Agreements) are much better for business 

Where non-compete agreements were restrictive and limiting, nondisclosure agreements (NDAs) are protective and flexible. 

That’s because NDAs: 

  • Focus on confidentiality  

An NDA protects sensitive information shared during the project.  

It restricts you, as the freelancer, from disclosing proprietary information to third parties and helps you reassure clients that you’re not divulging their information. 

  • Are limited in duration  

NDAs usually have a specified period for which the confidentiality obligations apply (often tied to the project’s timeline).  

Once the project is complete or the duration expires, the freelancer is free to work without any ongoing restrictions.  

  • Allow you to expand your expertise and diversify clientele  

Where signing a broad non-compete clause could restrict your ability to accept work from any client within a certain sector – an NDA allows you to protect confidentiality without affecting your ability to secure different types of projects. 

  • Gives you a certain amount of negotiation leverage  

Since NDAs are more focused on protecting confidential information, you can redline aspects that run counter to your business and request revisions to the NDA.  

This negotiation process allows you to set more favorable and less restrictive terms for freelancing.

Put your clients at ease 

Even though non-competes are now banned, you may occasionally encounter clients who aren’t aware and still ask you to sign one. 

In this case, I’d suggest you approach those potential conversations collaboratively, with mutually beneficial points. 

That way, you’ll help educate more business owners and employers on why an NDA has always been the better option, anyway. 

So you can still walk away with the relationship – and project offer – intact. 

Here’s a step-by-step approach you can take: 

  1. Understand your client’s concerns

Start by having an open conversation with your client to understand what advantages they believed a non-compete clause presented them with. 

Are they primarily concerned about protecting sensitive information, preventing competition, or something else?  

Understanding their perspective will help you tailor your explanation. 

  1. Explain the effect on your freelancing business 

Briefly describe what a non-compete clause would have entailed and why a non-compete negatively impacted your freelancing style of business.  

You can also reference this FTC ban ruling to help shape your argument. 

You can explain that an NDA primarily focuses on safeguarding confidential information, while a non-compete clause restricted your ability to work in a specific field or with certain clients for a period of time. 

  1. Emphasize collaboration and flexibility 

Highlight how an NDA encourages collaboration and allows you to work freely with various clients and industries.  

Explain that an NDA is a commitment to protecting your client’s confidential information without limiting your professional opportunities. 

  1. Mitigate the risks 

Explain how an NDA can effectively protect the client’s sensitive information from being disclosed to third parties (which is often the primary concern of clients who would’ve sought non-compete clauses).  

By protecting their intellectual property, you’re helping them avoid potential legal disputes and reputational damage. 

  1. Talk about client relationship continuity 

An NDA enables the possibility of a long-term professional relationship.  

You can work together on future projects without the limitations a non-compete clause would’ve imposed. 

  1. Discuss negotiation flexibility and legal considerations 

Focusing on an NDA means you’re more open to negotiating terms that work for both parties.  

You’re working to find a solution that aligns with your client’s needs while respecting your professional aspirations. 

  1. Reiterate your commitment to your client and the project 

Reinforce that you’re willing to work collaboratively to find the best way to protect their information while supporting your own professional growth.

Protect both sides with an NDA

Thankfully, non-competes are no longer an option because the FTC has agreed with workers and business owners everywhere that so many of your opportunities – present and future – were negatively impacted when you signed a non-compete agreement. 

So if you’re a freelancer or independent contractor currently stuck in a non-compete agreement, take heart! 

Business owners have until the effective date of the rule to notify everyone who works with them that their non-compete agreements are no longer valid. 

And if you need help sorting out an NDA that protects you and your client – we’ve got you covered with a nondisclosure template in the shop. 

If you’re in California and you need custom contracts, get in touch with me at Nicole Cheri Oden Law, and we’ll get you exactly what you need. 

 


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