FTC proposes banning noncompete clauses — a move that could have a big effect on the TV news industry
By Matt Collins Article may include affiliate links
The FTC has proposed a rule that would ban noncompete clauses, a common employment condition in the television news industry.
Noncompete clauses generally prevent an employee of, in the case of the TV industry, one station or network from quitting and going to work for another within a set period of time after turning in a resignation.
TV noncompetes will generally define what stations or locales are included in the non-compete. These are typically competing stations in the same or nearby markets.
Most noncompete clauses do not prohibit staffers from leaving for a station in a different market, as long as other contract terms are met. Talent may also negotiate specific outlets or mediums that are excluded from noncompetes, such as having a contract that allows them to leave for a job in newspapers or a specific station or network, for example.
Noncompete clauses most commonly apply to on-air talent and management at TV stations as opposed to behind-the-scenes staffers such as crew, newsroom staff and administrative workers.
Noncompetes can range in time from a few months to a year or more, with six and 12-month periods being common.
For example, an anchor at an NBC may have a noncompete clause that prohibits him or her from taking a similar on-air job at the CBS or ABC station in the same city.
In TV news, non-competes are seen as a way to prevent a station from losing on-air talent to a rival, with the argument being stations invest significant amounts of time, money and resources in building a brand around on-air personalities and that investment should be protected to some degree.
This isn’t the first time non-competes across all industries have been questioned.
Courts have debated their legality for years, with much of the legal arguments centered around the concept that everyone has the right to hold down a job in their chosen profession and non-compete clauses can hinder that.
TV stations and industries have also been known to find workarounds for noncompetes in order to hire talent they are eager to get, such as having a staffer resign from one station but have a signed contract with that rival in place that guarantees them a job once their non-compete expires.
In many cases, stations will even pay the worker while they “sit out” their noncompete, though often at a reduced rate. This essentially means the person is being paid not to work.
Another loophole is that some noncompetes may only ban the employee from appearing on air at a rival. In cases like this, a station may agree to hire staffer from a competitor in an off-camera role, such as producing or consulting, with the promise of moving on-air once the clause expires. In some cases, the off-camera role may be largely for show.
Terms of such agreements are often highly confidential but are the subject of heavy speculation among others in the market. Details of these agreements can also leak to other media outlets.
Meanwhile, the FTC argues that noncompete clauses have a negative effect on the economy as a whole.
“The freedom to change jobs is core to economic liberty and to a competitive, thriving economy,” said FTC Chair Lina M. Khan in a statement. “Noncompetes block workers from freely switching jobs, depriving them of higher wages and better working conditions, and depriving businesses of a talent pool that they need to build and expand. By ending this practice, the FTC’s proposed rule would promote greater dynamism, innovation and healthy competition.”
Others argue that noncompete clauses ultimately have limited effects since TV outlets have shown a willingness to pay significant sums of money in order to hire anchors and reporters they are interested in.
In these cases, the ultimate effect is that on-air talent, who are often highly paid to begin with, end up with even more favorable compensation and employment terms, including the ability to get paid while waiting out a noncompete. This can arguably lead to less money for newsrooms to hire other staff who often play an essential role in newsgathering, though given the confidentiality of employment terms is hard to gauge.
In the television news industry it’s common for talent to sign 1, 2 or 3 year contracts that include noncompetes both during the term of the contract or at its end. When it comes time for renegotiation, talent or their agents often go through a painstaking process of renegotiation, often with the terms of a noncompete being held up as collateral or bait.
Some deals may call for reduced or no noncompete time period at the end of a contract term, especially if the station or network opts not to renew the contract, passes on a right of first refusal or does not match a potentially higher offer from a competitor.
Ultimately, TV news contracts, especially for popular talent, come under heavy scrutiny both inside and outside of the industry despite being cloaked in secrecy, leading to leaks and speculation. Some of that information may be accurate, but it’s also often not or incomplete and can paint an outlet as overly aggressive, stingy or talent as greedy or a “victim” of the system. It’s also not unheard of for leaks to come from both sides as an apparent effort to attempt to skew negotiations one way or another.
Proponents of noncompetes, meanwhile, say that they help protect trade secrets and, in the case of television, prevent on-air talent from building a large following at one station and then leverage that to get a new job at a rival, often with a significant salary boost.
Noncompete supporters also say that employees can still negotiate for better contracts when deals expire and can ultimately benefit from pay hikes based on having a strong relationship with their station or network and its viewers. If they chose not to renew their contract, then they should have to go without a job for a set period as agreed, they argue.
Employers can always agree to waive a noncompete if a staffer has another job lined up so supporters say that is always another option that can be achieved through negotiation.
The FTC rule is unlikely to affect other clauses that often accompany noncompetes, such as confidentiality and nondisclosure agreements designed to protect a company’s intellectual and other property.
“However, other types of employment restrictions could be subject to the rule if they are so broad in scope that they function as noncompetes,” reads the FTC announcement.
Watchers say that the FTC rule, if put into effect, would likely be wide-reaching and include a retroactive ban on noncompetes that have already been signed.
While not an elected lawmaking body, the FTC has the power to create rules that have a similar effect as laws as long as they fall within the purview of its charge of ensuring fair and open markets. Rules can also be created to allow the agency to enforce laws. It has previously used its authority to declare noncompetes as anticompetitive and overly restrictive.
The FTC says that an estimated 30 million workers are under some form of noncompete agreements, which is about 18% of the workforce.
FTC analysis estimates that a ban on noncompetes could add $300 billion in increased wages across the entire country while saving consumers up to $148 billion on healthcare costs each year from employees quitting jobs under a noncompete and having to rely on subsidized health insurance while waiting for the agreement to expire.
The FTC also argues that banning noncompete clauses could spur innovative and entrepreneurship since it would allow employees to leave their current role to launch their own company, something that is often banned under noncompetes, particularly in the tech industry.
The FTC’s leadership voted 3 to 1 to publish the proposed rule, which is now open for a public comment period through March 10, 2023.
After that period, the commission will review comments received and can then issue a final rule, which may include modifications based on feedback.