Can an Oklahoma non-compete agreement stop an independent contractor from competing?

I typically write about Oklahoma non-compete agreements in the employer-employee relationship. But what about a situation that many people find themselves in: independent contractor status.

What are the limits on a business restricting an independent contractor from competing?

Are the limits the same as in the employer-employee relationship?

Read on to find out.

The Law

The primary source of law for non-compete agreements outside of the employer-employee relationship is another Oklahoma statute, Title 15, Section 217 which provides:

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Fairly broad and sweeping language, isn’t it?
Essentially, if the independent contractor agreement prevents a person from working in a particular area or field, it is probably not enforceable under this statute.

What does “restrained” mean?

Of course, there is the question of what it means to be “restrained” from exercising a law profession, trade or business. Does restrained mean any restraint, even reasonable means a business might take to protect itself and its investments?

Does restrained mean a complete prohibition against a contractor working in an industry, such as pharmaceutical sales? Or is the answer somewhere in between?
It turns out the answer is reasonableness. The fundamental question a court will ask about an Oklahoma non-compete agreement is whether it is a reasonable restraint on trade.

What Oklahoma Courts have said

The Oklahoma Courts have considered the question of using a non-compete to restrict an independent contractor and found it unenforceable.
In a 2011 case, the Oklahoma Court of Civil Appeals considered this language from a restrictive agreement involving an independent contractor:

6. Non–Competition. Representative agrees during the term of this Agreement and for a one (1) year period commencing on the date of termination of this Agreement, that in the (i) United States, (ii) State of Oklahoma and contiguous states, (iii) the Territory, during the term of this Agreement, including any renewals or extensions thereof, that it will not, either directly or indirectly, distribute, market, promote, solicit the future sale of, or sell, any medical device product competitive with any of the Spinal Concepts Products, or in any way have a financial interest … in any business engaged in the distribution, solicitation, promotion or sale of any medical device product competitive with any of the Spinal Concepts Products.
Scanline Medical, L.L.C. v. Brooks

The Court found the language unenforceable under Oklahoma law and said that “[b]y proscribing Defendant’s exercise of his profession, we hold the Independent Sales Representative Agreements violate the public policy expressed in §§ 217 and 219A, and are not entitled to enforcement.”

In sum, if the restrictive Oklahoma agreement keeps the independent contractor from working in their chosen profession it probably will not be enforced.


 

Posted by Shawn Roberts

I write about and try to answer practical Oklahoma legal questions. I tend to focus on estate planning and business issues. I make a living as an attorney working for Resolution Legal Group in Oklahoma City. I am husband to Amy and the father of Sam and David. We live exactly in the path where the "wind comes sweeping down the plains."