The National Association of Broadcasters (NAB) has signed its name to a letter sent to members of Congress this week that opposes a proposal by the Federal Trade Commission (FTC) to prohibit non-compete clauses in contracts.
The proposal made by the FTC in January would bar employers in the United States from imposing non-compete clauses when hiring or promoting workers. Such clauses are routinely found in contracts for television and radio talent, online journalists, editors, producers, photographers, voice-over artists, actors and other media and entertainment workers.
Non-compete clauses typically prohibit an employee from accepting a job offer at a company that offers goods or services in the same industry for a pre-determined period of time. That time frame generally lasts from six months to a year, though some non-compete clauses can extend beyond that.
One famous example of a non-compete clause at work occurred more than a decade ago when late-night host Jay Leno was set to reclaim his spot at NBC’s “The Tonight Show,” much to the chagrin of then-current host Conan O’Brien. Rather than move to a later time slot, O’Brien elected to leave the network; he paid his staff by launching a multi-city, in-person sketch show called the “Legally Prohibited from Being on Television Tour,” so named because his exit clause with NBC prohibited him from appearing on another television program for a set amount of time. (There were reports that NBC elected not to enforce that part of the contract.)
That type of exit clause isn’t uncommon in the industry, but officials at the NAB say scholars, economists and even some courts have found non-competes to be “reasonable and beneficial for both businesses and employees.”
In the letter sent to Congress and the FTC this week, NAB officials and others said 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.”
In other words, if there is to be a federal ban on non-compete clauses, it should come from an act of Congress, not a unilateral proposal by the FTC.
The FTC hasn’t weighed in on the accusation that it lacks the authority to ban non-compete clauses, but the agency is standing by its proposal.
“The freedom to change jobs is core to economic liberty and to a competitive, thriving economy,” Lina M. Khan, the chairwoman of the FTC, said in a statement. “Non-competes 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.”
Some states already have a pseudo-ban on non-compete clauses: In California, employers aren’t prohibited from including non-compete clauses and similar language in employment contracts, but the state’s law says courts can’t recognize non-compete clauses if an employer sues a current or former worker over the matter.
Still, some workers don’t know their rights under various state laws, and elect for unemployment for a period of time in order to see through the non-compete period. Additionally, state bans on non-compete clauses aren’t always honored by federal courts, though it depends on where the company is based or where the employee lives.
The FTC’s proposal would remedy that in a way that is more equitable to workers, according to the agency.
“Research shows that employers’ use of non-competes to restrict workers’ mobility significantly suppresses workers’ wages—even for those not subject to non-competes, or subject to non-competes that are unenforceable under state law,” Elizabeth Wilkins, the Director of the Office of Policy Planning, said in a statement.
The NAB and other organizations say the FTC is out of line with its proposal, and has urged Congress to revisit tools to curb its attempts with “appropriations riders.” A spokesperson for the NAB said its organization is specifically opposed to the proposal because the broadcast industry “presents a unique case for reasonable non-compete clauses due to the substantial investments broadcasters make in promoting on-air talent.”
In addition to the NAB, the letter sent to Congress and the FTC was signed by dozens of national and state organizations, as well as local chambers of commerce. Those national organizations include the Consumer Technology Association, the National Newspaper Association and the Consumer Brands Association.