David Oxenford

By: David Oxenford, Wilkinson Barker Knauer

The Federal Trade Commission last week announced that it was dropping its appeal of a court decision which put on hold an FTC order adopted during the Biden administration which banned noncompete agreements in all industries across the country (see our note here). This ban was a concern to many in the broadcast industry as it would allow station employees, including on-air talent, managerial employees, and others with access to sensitive competitive information to freely move from station to station within a broadcast market.

But the FTC’s decision to drop the appeal of the court’s rejection of the nationwide ban does not mean that the FTC has abandoned all concerns about the use of noncompete agreements.  Instead, the FTC issued a Request for Information seeking public comment on the use of noncompete agreements, seeking information on a variety of issues including why an employer may use noncompete agreements, typical salary ranges of employees subject to these agreements, their terms or limitations, and harms imposed on employees by these agreements.  Comments are due November 3.  The FTC also announced plans to pursue concerns about such agreements on a case-by-case basis.

In connection with the FTC decision not to appeal the court decision, the FTC chair and another Republican commissioner issued a separate statement promising that the FTC would be releasing a series of letters addressing concerns about the use of noncompete agreements in various industries, including warnings about the improper use of such agreements. The statement did not specify which particular industries would be targeted in these subsequent letters.  It remains to be seen whether there will be any concerns expressed about the use of noncompete agreements in the broadcast industry.

During the rulemaking process that led to the FTC’s adoption of the nationwide ban, many comments were filed, including those from the broadcast industry, expressing concerns about across-the-board banning of noncompete agreements. In broadcasting and many other industries, concerns were raised about eliminating the use of noncompete agreements to prevent executive and managerial employees with access to sensitive business and strategic information from leaving a company and immediately using that information at a competing company.  In the broadcast industry itself, there was particular concern about not being able to restrict the movement of on-air talent, as stations spend considerable time and money to train and publicize talent to attract audiences, and they don’t want that investment to walk out their station’s front door and into the cross-town competitor where that training and publicity would be used against the company that made the initial investment.

Many comments in the original proceeding acknowledged concerns that, particularly in lower-level positions, the use of noncompete agreements could prevent employees from pursuing their chosen profession. Fears were expressed that noncompete agreements were being used to prevent workers from pursuing better jobs in their chosen industry, even where those workers did not have access to proprietary information or competitive secrets.  For instance, using a noncompete to prevent a restaurant worker or hair stylist from moving from one business in a local area to another seemed to many commenters to be an undue burden on an employee’s ability to make a living, when such employee departures would have a minimal impact on the business from which they were moving.  That appears to be the kind of issue about which the FTC remains concerned, as it released a Consent Order entered into with a company in the funeral business that was restricting workers at crematoriums from leaving the company and moving to another company in the same business.  While the Consent Order does not specifically say which of the company’s employees were covered by the provisions of the decree, it appears that some executive employees were carved out from its provisions, perhaps giving credence to some of the complaints raised about the FTC’s  order issuing the nationwide ban.

While the broadcast industry may not rise to the top of the list of industries likely to get a letter from the FTC warning about the widespread use of noncompete agreements, broadcasters should not ignore whatever concerns are expressed in the letters that do go out.  Certainly, there are positions at any broadcast station where employees don’t have access to confidential competitive information and where the use of a noncompete agreement may not be appropriate. In the past, there have also been concerns from labor advocates even about the use of these agreements to bind on-air talent, leading a few states to restrict their use.  Broadcasters should monitor developments carefully to see how policy in this area develops under the new case-by-case approach to be used by the FTC.