The first quarter of 2023 brought a myriad of new laws with which media employers continue to grapple. From ensuring compliance with the Pregnant Workers Fairness Act, which goes into effect in June, to contending with the use of automated systems and artificial intelligence while mitigating risk of increasing federal oversight and regulation, to maneuvering anti-diversity, equity, and inclusion laws while striving to create a more diverse, equitable, and inclusive work environment, to ensuring compliance with the ever-increasing pay transparency laws being enacted across the United States, there is no shortage of new employment laws to keep in-house counsel up at night.
If I were a betting woman, I would say what remains top of mind for most media employers in 2023 remains the Federal Trade Commission’s January 5 proposed rule banning employers from utilizing non-compete clauses with their employees. The FTC’s proposal has led other employment attorneys to ask the question: Can we really imagine a world without non-competes and, if not, what are media employers doing about it?
The proposed rule, referred to as the Non-Compete Clause Rule, would
- generally prohibit employers from entering into non-compete clauses with workers;
- require the rescission of existing non-compete clauses within six months of the proposed rule’s adoption; and
- mandate employer notice to all current and former workers that their non-compete clauses are no longer in effect.
According to the FTC, one in five American workers is under a non-compete agreement; The New York Times reported that in broadcasting, non-competes are “ubiquitous” and that, according to one survey it cited, “about 90 percent of news anchors, 78 percent of reporters and 87 percent of weathercasters were bound by non-competes in 2022.” The far-reaching implications of the proposed rule, particularly for media employers, cannot be overstated.
On February 28, 2023, the National Association of Broadcasters (NAB) joined dozens of national and state level trade groups in a letter to the United States Congress opposing the FTC’s proposed rule. The NAB and others voiced the concern that the “sweeping rule would invalidate millions of contracts around the country that courts, scholars, and economists have found entirely reasonable and beneficial for both businesses and employees.” In the letter, the NAB and other organizations took the position that the validity or enforceability of non-compete clauses (or lack thereof) should remain with the courts to decide, as the FTC lacks constitutional and statutory authority to issue such a rule.
While it remains to be seen what, if anything, Congress will do concerning the FTC’s proposed rule—or its own efforts to limit non-competes through a reintroduced bill titled the “Workforce Mobility Act of 2023,”—the FTC has continued to forge ahead in its rulemaking process, albeit allowing a short extension of the public comment period on the proposed rule, but showing no sign of stopping. In response to the FTC’s Notice of Proposed Rulemaking, the NAB submitted comments in April reiterating that the FTC’s approach is “overbroad, unreasonable, and contrary to law.” The NAB urged the FTC to take a more “measured approach” to the proposed rule and outlined the following ways the FTC should do so:
- Include an exception allowing non-compete agreements for on-air talent, thereby allowing a broadcaster to “preserve the goodwill and value of its brand that it has created through the promotion of on-air talent”;
- Include an exception for broadcast executives and highly compensated staff who benefit from significant investment of training and development by a media employer and are more likely to be able to negotiate favorable terms in their employment contracts and protect themselves from what the FTC has deemed as unreasonable contractual provisions;
- Clarify whether commonly used contractual terms in the broadcast industry as well as other industries, such as rights of first refusal, rights to match, and exclusive negotiating windows, would constitute de facto non-compete clauses and thus violate the proposed rule; and
- Limit application of the proposed ban to contracts entered into after the effective date of the proposed rule, which the NAB states is unclear from the language of the proposed rule despite language stating the proposed rule “would not apply retroactively.”
Further, the NAB made clear in its comments that it does not object to the FTC’s considered alternative to banning non-competes—requiring instead that employers disclose non-compete provisions to potential employees prior to the commencement of the employment relationship. Colorado made extensive amendments to its non-compete statute and, in August 2022, put into effect a similar disclosure requirement, going one step farther by voiding any non-compete agreement where proper notice is not provided.
Stay tuned… Every media employer will want to see how the proposed rule, if passed, will play out with legal challenges likely to follow. In the meantime, non-competes remain a viable tool in a media employer’s business arsenal and reasonable non-compete clauses should continue to be utilized, where allowed under applicable state law.
Jamila M. Brinson is a labor and employment and litigation attorney who partners with employers and management to proactively shape their workplaces and resolve issues when they arise. Whether handling labor and employment disputes, commercial disputes, or media, trademark, and copyright litigation, Jamila listens to her clients and creates legal strategies to obtain the best possible result. She also serves as Chair of Jackson Walker’s Diversity & Inclusion Counseling group. In recognition of her practice, Jamila has been named to Thomson Reuters’ Super Lawyers – Rising Stars list (2019-2021) and Lawdragon’s list of the 500 leading U.S. corporate employment lawyers (2020-2021). She is Board Certified in Labor and Employment Law by the Texas Board of Legal Specialization.