What's negotiable for ICs? It depends.

Mark Pestronk

Q: Do independent contractors (ICs) like me have any bargaining power with their hosts? If I terminate my relationship with my host, is the host obligated to pay me my split after I leave? Are hosts allowed to impose post-termination noncompetes?

A: If your host is small (e.g., an agency with just a few ICs), and if you already have a good client base, then you do indeed have a lot of negotiating clout. You can negotiate the commission split and lots of other business and legal terms.

On the other hand, if you are hosted by a very large company with hundreds or even thousands of ICs, and if you are just starting in the business, all or almost all of the contract terms will be nonnegotiable. The host does not need your business and probably wants to make all IC contract terms uniform for ease of administration.

If your host relationship falls somewhere in between, you probably have some ability to negotiate the terms of your agreement, including key areas such as commission splits, payment deadlines, accounting rights and the right to retain sub-ICs or to employ others.

Another area of negotiability is what happens when the relationship is terminated. Again, depending on the host you are dealing with, you may well have some room for negotiation. Contrary to popular belief, there are no laws or regulations affecting this aspect of an IC relationship.

A common misconception among ICs is that if a given clause is not consistent with an IC relationship, such as a requirement to work at certain hours, it follows that the entire contract is “illegal.” While such requirements make the contract more like one of employment, it does not follow that it is totally unenforceable.

When it comes to noncompetes, keep in mind that this is a business-to-business relationship, which means that state laws that prohibit noncompetes do not apply to ICs. The sole exception is California, where a recent precedent holds that noncompetes in IC contracts may be illegal if they restrain competition.

As you may know, the Federal Trade Commission has proposed a rule that would outlaw noncompetes nationwide, even for ICs. (See my column “Noncompete clauses could be going away”.) I predict that if a Democrat wins the next presidential election, the proposal will be adopted, so you may not have to worry about your noncompete after next year.

In any case, noncompetes — meaning a prohibition on selling any travel — are actually quite rare in host-IC relationships. Much more common is a provision prohibiting you from soliciting or handling the host’s clients, as opposed to clients you brought in. That kind of clause is fair, especially if the promise is mutual.

If you are trapped under a contract that requires you to forfeit all post-termination payments or has other oppressive terms that keep you from switching hosts, such as a true noncompete, you should consult a knowledgeable attorney who may be able to help you negotiate your way out of the relationship. 

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