Let’s Say Goodbye to Non-Compete Agreements

The Federal Trade Commission (FTC) just proposed a new rule that would ban employers from imposing non-compete agreements on their employees. Having spent the majority of my working life in the radio industry, I can’t remember a broadcasting company I worked for that didn’t have me sign one of these agreements, and I’m willing to bet that like me, you were never a fan of them.

What an FTC Ban on Non-Compete Would Mean

The proposed new rule eliminating non-competes would mean that employers could no longer make signing such an agreement a condition of hiring and that all existing non-competes would sunset within six months of the rule’s adoption. It would also require that employers give notice to their employees that the non-compete clause is no longer in effect and will not be enforced.

Should radio owner/operators be afraid? No, and let me tell you why.

The Day I Tore Up My Employee Non-Competes

Back when I was a general manager in Atlantic City, I had a sales employee walk across the street to my biggest radio competitor. I wanted to pursue this employee in court because I had them under a non-compete contract. However, the new owners of my radio stations said that if a person didn’t want to work for our broadcast company, to just let them leave.

Puzzled by this new operating philosophy, I asked the new owners, if they didn’t intend to enforce employee non-compete agreements, why did they keep them in place when they bought the radio stations from the previous owner. The company president’s response to me was, “darn if I know.” I said then, I’m going to tear them all up, and he said, “go ahead.”

Life Without Non-Competes

I have to tell you, as a young manager, the realization that every employee of my radio stations could walk across the street to my competitors, was scary.

However, something wonderful happened.

People who now worked for me knew they no longer were working under non-competes, and they now worked for me because they wanted to. It also made me realize that I too needed to provide a style of management that made people want to stay with me more than going someplace else. That, I would learn, is the best way to run a business.

Even better, having this type of work environment saw many talented people waiting in line to come work at our stations.

The FTC says the evidence to date suggests that non-competes suppress wages, reduce competition and keep innovative ideas from being birthed.

The rule making on this ban has just begun and the FTC is currently collecting comments from both supporters and opponents, and no timetable has been established for rendering a final decision on this proposal.

You can add your comments to the Federal Trade Commission decision making process by writing “Non-Compete Clause Rulemaking, Matter No. P201200” on your comment, and filing your comment online at https://www.regulations.gov

Today’s Media Environment

Radio today, unlike in 1920, operates in a marketplace that is over-served, and when that happens the basis of competition changes, opening the door for a new type of competitor.

Sadly, while this new media world was being born, the radio industry was focused on consolidation and increasing shareholder value, by replacing its radio personalities with technology and creating a radio medium that would play-it-safe to become predictable and boring.

“Never be boring.”

-Valerie Geller

Programming consultant, John Frost, recently asked this question in his weekly Frost Advisory,  “What does your radio station value?” Winning companies value encouragement and teamwork, according to Ken Blanchard, author of books like “The One Minute Manager.”

“Our greatest fear should not be of failure,

but of succeeding at things in life that don’t really matter.’

-Francis Chan

Radio can only win the future by attracting the most talented people to work in our industry, and giving them permission to fail.

9 Comments

Filed under Education, Mentor, Radio, Sales

9 responses to “Let’s Say Goodbye to Non-Compete Agreements

  1. Victor Escalante

    Noncompete contracts are the least of radio’s current woes. I predict Ai will cut deeper into human talent. I’ve experimented with it for voice over work and writing, and I’m amazed with it. Coming soon to a station Ai generated programming.

    Liked by 1 person

  2. Victor, AI is already impacting our world and the speed at which this technology is evolving makes one’s head spin.

    Thanks for bringing it up.
    -DT

    Like

  3. Steve Biro

    Non-compete clauses have been illegal in New York for a long time. They’re considered restraint of trade. Meanwhile, I agree about the impact of AI on radio – and a lot if other things. There’s less and less reason to tune into commercial radio with each passing year.

    Liked by 1 person

  4. A good constitutional lawyer could have successful challenged and buried non-compete unconstitutional before the first pen hit the paper. Simple … non-compete is and always was RESTRAINT OF TRADE.

    Liked by 1 person

    • Victor Escalante

      It’s not that easy. I was sued for breach of contract and had to pay $30 K to defend myself. My first lawyer was going to defend on a technicality and that only emboldened the plaintiff. I had to hire another lawyer who threatened to counter sue as a class action. Under the current law, even if you prevail, you are still out thousands of dollars.

      Liked by 1 person

      • Excellent point Victor. For many, they simply can’t afford the legal costs; win or lose, they still economically lose in the end.

        For the companies, it’s maybe simply a rounding error on their balance sheet — in other words, it’s a no-brainer for them to fight to uphold their non-competes.
        -DT

        Like

  5. Victor Escalante

    In my case, I was facing a million dollar default judgement had I ignored the suit. Since radio is a small world, word spreads quickly and others are bullied into obedience. The irony was that I was one month away from the two year noncompete term expiration. Any proprietary competitive knowledge I held would have been dated and irrelevant .

    Liked by 1 person

  6. The Federal Trade Commission has received more than 4,400 public comments as of Friday on its proposal to ban non-compete agreements — many supporting the move, Axios’ Emily Peck reports.

    Why it matters: The comments reveal deep dissatisfaction with non-competes — and some employers are taking notice.

    Yes, but: Such a move would likely get watered down, delayed, or even tossed out in court.

    The intrigue: Regardless of where the ban lands, there’s “growing hostility to the idea that there should be those kinds of restrictions, and it’s changing the environment that employers have been comfortable with in the last number of years,” an employment lawyer told the Wall Street Journal earlier this week.

    What they’re saying: After reading through many of the submitted comments, we found just one opposing the ban.

    “There is something distinctly un-American about baring individuals from liberty and the pursuit of happiness by limiting economic opportunities to whatever company a person happens to work for at the time,” reads one illustrative comment.

    The other side: Companies say non-competes keep former employees from spilling secrets, and that they promote innovation.
    -Axios, 1/23/2023

    Like

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