Quitting Your Job to Freelance? How to Keep the Law on Your Side

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You’ve been itching to go freelance and leave your job at EasyPub, Inc. You want to call your own shots, set your own hours and work from your own space.

You have weighed the pros and cons, made a plan and are ready to turn your side hustle into your full-time job. You have a couple of regular clients on board, with a few more waiting in the wings. You’ve cleaned out that weird little nook in the corner of your house and put in a nice desk and some office trappings so you don’t have to write with your laptop on your knees.

You’ve given notice to your employer, EasyPub, updated your website and given yourself a pump-up talk. You’re ready to dive into life as a full-time freelancer!

Before you do, make sure you’ve planned ahead to get your legal ducks in a row — you don’t want the contract you signed with your employer to come back to bite you.

If you know your obligations, you’ll be able to prepare to launch your freelance business while staying on the right side of the law. Here are the things you need to consider before you leave your day job.

1. Your contractual obligations to your existing employer

If you signed a contract at any time while you were working for the company, you need to check to see if you agreed to these specific provisions. Some companies put these provisions in their employees handbooks, so you’ll need to look at that, too.

Non-compete clause

A non-compete agreement prevents you from working in competition with your employer and must be limited in time (generally not more than two years) and geographic scope. Non-competes are enforceable in most, but not all states.

If you have signed a non-compete, you must read it carefully to determine what you can and cannot do to make a living after you leave the company. For example, a non-compete might say that if you’re a copywriter for a marketing company in Chicago, you can’t work for any competitive company within a 25-mile radius for two years.

Non-solicitation of customers agreement

A non-solicitation of customers agreement is designed to prevent former employees from poaching the company’s customers for a limited period of time, usually a year. This is different from a non-compete and is becoming more common.

If your job involved close interaction with customers, they have a relationship with you. The company doesn’t want to lose the customers when they lose you as an employee.

As with the non-compete provision, non-solicitation provisions are enforceable in most states, but not all. You will not be able to work with the company’s customers after you leave your job if you signed an agreement with a non-solicitation provision in it. This provision could impact your projected income, if you were planning on continuing to write copy for Acme Corp. as a freelancer.

Non-solicitation of employees clause

If you’re leaving your job to start your own company and are planning to hire your own employees, you need to be aware of this provision. Many companies want to protect their workers from being taken by departing employees for a certain period of time, usually a year.

Again, the company is trying to protect its relationships with contract language and the contract, if reasonable, is enforceable in most states.

2. Your fiduciary obligations to your existing employer

A fiduciary obligation is the duty to act in another person’s best interest and not in your own. It means you have to put that other person first — and in this case it’s your employer. When you’re making plans to leave your job, keep these two points in mind.

Best efforts

While you are still with EasyPub, you have the obligation to use your best efforts at your job — even while you’re planning to leave it. Don’t get distracted by the excitement of going out on your own and forget to give your all to your current employer before you leave.

Duty of loyalty

If you’re a high-level or skilled employee with the company, you owe a duty of loyalty while still employed. When you’re planning to leave your job, you may not take any action that competes with the company (like convincing a prospective customer to hold an assignment until you’re on your own), even if you haven’t signed a non-compete agreement.

You always want to leave a job on good terms. Building and keeping good relationships with former employers will be useful as you develop your career and perhaps build your own company.

Leaving your job? Don't take any action that competes with the company, says @KathrynGoldman Click To Tweet

3. Ownership of intellectual property and confidential information

While working for EasyPub, you had access to the company’s information. Some of the information had to do with customers, some of it related to EasyPub’s business and some of it you created yourself.

You have obligations to protect EasyPub’s confidential information and to respect its intellectual property even after you leave the company.

Intellectual property

Work you created while you were employed by EasyPub belongs to the company unless you have a written agreement that says otherwise.

When you are making your plans to leave EasyPub, you should not create any work on the company’s time, or using the company’s equipment, materials or other resources.

To be sure that what you create during this planning stage is yours and not the company’s, you should not use your company-issued laptop or other tools for your side hustle. Don’t use your company email address to do business for your new gig. Keep everything completely separate to protect yourself and your new business.

Confidential information

Most companies have provisions in their handbooks that require employees to return all company property, including all information in the employee’s possession, to prevent any disclosure of that information.

To comply, search your computer, email (including sent and deleted email), any cloud storage services, phone, iPad, and anywhere and everywhere else you might have stored files or data owned by the company.

Leaving a day job to go out on your own is an exciting time. Reduce the risk and calm your nerves by being thoughtful about how you do it.

Kathryn is a lawyer, but she’s not your lawyer, so this article isn’t technically legal advice. For legal counsel specific to your situation, please speak with an attorney.

How did you protect yourself as you prepared to leave a day job?

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Comments

  1. Thanks for these tips, Kathryn! Not ready to quit just yet, but things to keep in mind when the time comes.

  2. M’am, nice tips..one should not be over ambitious and take decisions at random…one requires patience, careful thought to an event (might have occurred to others) and then assess the situation in right perspective before jumping to own business leaving a job which is already feeding him..A bird in hand is worth than a bush…as the saying goes….It does not mean that one should not have good expections in moving higher on the ladder…Thanks…..for the articles and suggestions

  3. Thanks for sharing this advice on starting your own business. I work as an IT solutions professional, but I have been thinking of running my own computer business. It sounds like I would have to look at my contract and see if I have a non-compete clause in there. Hopefully it isn’t there- I definitely don’t want to break the law when starting a business!

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