Ban Noncompete Clauses?

The Federal Trade Commission’s proposed new rule banning non-compete clauses in employee contracts could have a major impact across the media industry. Noncompete clauses in talent, sales, and management contracts are common in the radio industry.

The FTC proposed this rule because noncompetes suppress wages, hamper innovation, and block entrepreneurs from starting their own businesses. It estimates the new proposed rule could increase wages by nearly $300 billion per year and expand career opportunities for about 30 million Americans.

In recent years, noncompetes have been banned in California, North Dakota, Oklahoma, and Washington, D.C. To protect low-income employees, nine other states have banned them except for people who earn above a certain threshold.

We talked to several managers, programmers, talents, and executives to gauge radio’s perspective on noncompete clauses. Understandably, noncompetes are highly divisive. Corporations and management are generally pro while talent and talent-oriented executives are con. Some see both sides of this issue.

Pro Noncompetes

Most radio corporations oppose the ban because they rely on noncompetes to prevent talent and intellectual property from going to direct competitors. In radio, the typical noncompete is three to six months.

• A major market GM: “Those companies who invest in outside marketing, contesting, coaching/consulting to help grow talent want to protect their investment with a noncompete. Is it possible that without a noncompete companies will pull back on the personal development of talent?”
• Bert Weiss Host of the syndicated Bert Show based at Cumulus Atlanta on the pro side: “I work hard on building the brand of our co-hosts. A lot of time, care, and money goes into marketing the show which, in turn, builds a co-hosts brand. Do I want them to immediately use that equity and compete against me? Nope.”
• Dave Ryan, iHeart Minneapolis morning host is sympathetic to both sides of the aisle: “You can spend time and money building up a co-host’s brand with billboards, T-shirts, a social media following, and the platform of a huge radio station, but minus a noncompete, that talent can finish a show on your station Friday and show up on a competitor Monday morning.”
• Lotus Seattle Star 101.5 Program Director and Air Talent Lisa Adams: “As a talent, I say, hell yes, ban noncompetes. I want my freedom. As a PD, I want to protect the time and investment made in marketing, promoting, and developing talent. Without a noncompete, I would hesitate to make those investments.”
• A major talent executive: “Noncompetes protect a company’s investment and branding of successful talents. However, it’s unreasonable for corporations to impose noncompetes beyond the terrestrial signal or metro area. Talent would be wise to have a lawyer or agent review a contract before signing it, and they must honor the contract they sign.”

Con Noncompetes

• Workhouse Media CEO Paul Anderson: "Banning noncompetes nationally would be good for mobility, good for talent, good for the economy, and ultimately good for broadcasters. Over the years, many states have passed statutes banning noncompetes altogether or making them difficult to enforce. In a free market economy, noncompetes artificially keep compensation down and give employers unbalanced power.
  
  Noncompetes also disrupt the listeners who love their radio companions as they navigate their commutes and days. The connect that radio personalities provide to the community is part of the service that radio uniquely provides. Why punish the listeners with having a popular personality off the air, often with no explanations from the broadcaster?
  
  Having to sit out three to six months is not fair to the talent, the audience, or the community. Today, all shows are not only local, they are national. Streaming technology enables a talent to live in California and host a show in Florida, and the audience can listen from anywhere. Why restrict audience preferences?
  
  Having said all of this, it’s fair for a company to protect intellectual property and trade secrets. Confidential information should be protected and is covered by separate trade secret statutes in all 50 states."
• The Weiss Agency Founder and President Eric Weiss: “There is plenty of research to show employers use noncompetes to restrict worker's mobility, and significantly suppress wages, and that holds true for the radio business.
  
  A talent that has established brand equity in a market is precluded from using it to their economic advantage at another station in the market. Noncompetes can cause talent to uproot their family from a place they chose to live in order to continue to make a living.” (See Eric's tips on dealing with noncompetes in the Coaching Tip below).
• Bert Weiss, on the pro-ban side: “Stations assume an audience is going to forget their attachment to you in three months and not follow you to the new station. It’s especially irrelevant now because social media can keep talent connected with personal P1s that track your every move. I know this is business, but it’s also a person’s life. Clearly, both sides don’t think it’s beneficial to continue to do business together. So, let the talent go, wish them well, and hope your show is good enough to withstand the competition.”

To keep radio viable in the multimedia landscape, talent has become our most valuable asset. The Randy Lane Company believes whether your company includes noncompete clauses or not, the surest way to maintain talent is to set up a culture that values, compensates, respects, and recognizes talent.

What are your views on noncompete clauses in contracts? We’ll highlight them in next week’s Content Ideas. Email: randy@randylane.com.