FTC bans non-competes: How could this affect the TV industry’s love of them?

The FTC has voted to ban non-compete clauses in the U.S., a common feature of my broadcast industry contracts, especially for talent.

In 3-to-2 vote April 23, 2024, the commission passed a measure that would ban most non-compete clauses from employment contracts and agreements.

The rule could go into effect as early as 120 days from its effective date, possibly sometime as early as August 2024, but that may be unlikely considering that at least one lawsuit is already planned against the rule.

Because of that, it’s important to understand that the future of non-competes is still very much up in the air and it likely would not be wise to start making decisions about future employment based on the rule going into effect — but instead take a wait-and-see approach at this point.

The U.S. Chamber of Commerce, which has been a vocal opponent of the rule, has already said it intends to sue the FTC over the issue. 

Assuming the rule does become a reality at some point, it would ban any for-profit companies from using non-compete clauses. It would also retroactively void any existing ones effective on the day the rule is implemented. 

There is only one exception that affects most workers: The rule allows “senior executives,” which it defines as someone making more than $151,164 per year and hold a “policy-making position” within the company to be bound by a non-compete agreement. 

TV stations and networks frequently include non-complete clauses for on-air talent, including anchors and reporters. They will often bar the employee from leaving the station or network and going to work for a rival within a set period of time such as six months or a year.

Advertisement

For local TV stations, the non-compete may only be limited to specific regions or markets but will often allow employees to take a job in a different market before the expiration of their current deal.

The new rule could affect as many as 30 million workers in the U.S., including the TV industry. Proponents of the law also say it could inject billions of dollars into payrolls across the country from employees changing jobs for higher pay.

Other supporters also say non-compete clauses often prevent employees from leaving jobs they may be unsatisfied with because they wouldn’t be able to make a living in their chosen field. In some past cases, courts have thrown out non-compete clauses for being overly broad or too specific in instances where the agreement would make it difficult or impossible for someone to exit their current job and find work elsewhere that did not violate the terms.

Opponents say non-compete clauses are necessary for businesses to protect their investment in employees as well as guard trade secrets and confidential information. At least some of those against the rule contend that the FTC may lack the regulatory authority to make such a broad rule.

The concept of staff as “investments” is particularly true in TV news, when well-known and popular personalities are heavily promoted by the station and largely are dependent on their stations to attain their level of recognition. 

TV stations have long used non-competes to bar, for example, a popular anchor from jumping to a rival station after the original station spent years building up their status in the community. 

Assuming the rule is implemented, it could have drastic effects on many industries, including television. Talent could start leaving stations if another one in their hometown is able to pay better or offer more appealing employment terms. This could create a revolving door of talent but also increase stations’ incentives to focus on employee retention. 

Eliminating non-competes could also make it easier for employees who want to stay in the market but are unhappy with their current job to more easily find employment in the industry without having to move, which was often one of the only realistic options for talent looking to exit a station early. Some also believe it could lead to better salaries as stations compete for talent.

On the other hand, having no non-competes also lowers the incentive for stations to invest heavily in talent and provide higher salaries as an incentive to keep staffers happy if they realize that person could pack up and leave only to appear on a crosstown rival the next day.

The entire industry could see drastic shifts in how pay packages, including eliminating fringe benefits such as wardrobe allowances that are sometimes used to make an employee’s overall compensation package larger without increasing base salary.

It’s also possible that station lawyers might come up with new ways to work around non-compete clauses. Some possibilities (and they are just that, possibilities), include longevity incentives that kick in after a certain period of time or even trying to classify talent as “senior executives.” It’s not clear how these types of workarounds, or any others dreamed up by stations, might play out in courts if they were to be challenged. 

In the past, some high-profile TV personalities have found ways around non-compete clauses.

Advertisement

In at least some instances, talent have been lured away from a station with an agreement to essentially pay them to sit out their non-compete. Because broadcasting non-compete agreements are often limited to on-air roles, a competing station may be able to place an anchor on their payroll as long as they do not appear on TV during the time in question. 

The employee may be given cursory off-air duties to perform or simply collect a paycheck until the non-compete expires and their can be introduced on-air at their new station.

With California, North Dakota, Oklahoma and Washington, D.C. already almost completely banning non-competes, the FTC rule would not directly affect as many workers as it once did, especially given California’s large population and high-profile TV markets. Colorado, Maryland, Rhode Island and Oregon have laws on the books that limit non-competes, typically to highly-paid staffers, which could potentially include top talent.

According to current law, employees typically cannot be held liable for violating non-compete clauses. If a former employer wants to enforce such a clause, they typically must sue the new employer, not the worker. 

The new rule would not bar companies from requiring non-interference or non-solicitation or clauses or confidentiality agreements in the workplace.

Another provision in the FTC rule also allows non-competes if one person is selling a business owns at least 25% of the business being sold, but this is unlikely to affect talent in the broadcast industry.