NAB Tells Congress It Opposes Ban On Noncompete Agreements

The National Association of Broadcasters has joined with numerous state and national organizations in sending a letter to Congress opposing the Federal Trade Commission’s proposed rulemaking banning noncompete clauses nationwide.

The NAB contends that the proposed ban on noncompetes is far-reaching and oversteps the FTC’s jurisdiction. It says broadcasting presents a unique case for reasonable noncompete clauses due to the substantial investments broadcasters make in promoting on-air talent.

The letter reads, in part:

“The FTC lacks the constitutional or statutory authority to issue such a rule and, in attempting to do so, the agency is improperly usurping the role of Congress.

“Moreover, this 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. Accordingly, we ask you to exercise your oversight and appropriations authority to closely examine the FTC’s proposed rulemaking.”

I can understand why the NAB feels the banning of noncompetes could threaten investments broadcasters make in hiring, training and promoting personnel at their TV stations.

Here’s a nightmare scenario for you if you’re a TV station general manager: Late one afternoon, a key employee walks into your office to tell you he’s leaving for another station in the same market.

The employee could be an on-air anchor. Or a sales manager you recently hired and moved from another market. Or a marketing executive who’s been at the station for years.

In any event, he starts tomorrow morning across the street.

Ouch.

The investment in marketing the on-air anchor, the money you spent moving the sales manager and the competitive knowledge the marketing executive has are all suddenly benefiting your competitor.

If noncompetes or personal services contract were banned, these scenarios might be common practice at stations.

Noncompete agreements protect the stability of stations and provide protection and assurance to employees who sign one.

Ideally, the personal services contract needs to be mutually beneficial to both parties.

Usually, the personal services contract is for a set period of time and spells out what the salary will be in each year.

For the employee, the advantage is having some security, knowing the station has made a commitment to the point of stating the salary for each year. However, it’s up to the station to pony up the money to entice the employee to make that commitment and sign the contract.

It should be standard operating procedure for certain new employees to sign a noncompete. To entice current key employees to agree to sign a noncompete, the station should increase their salary.

It doesn’t always have to be about money, although it usually is.

If stations don’t see the need to reward certain employees with a personal services contract, they will spend that money anyway looking for a replacement.

Losing a dedicated, talented, employee to your competition, another station right in your market, is bad business. It hurts. It looks bad. It’s damaging to morale. It’s embarrassing.

Your station is wounded and the competition gets someone who knows your secrets, knows the market and can go right to work.

Noncompete agreements and personal services contracts are essential in many cases to the unique situation local TV stations find themselves.