The case of a lawsuit by Cumulus against one of its former air personalities and the owner of that person’s new station intrigued us.
Cumulus alleged in the case filed last week in federal court that former DJ Amanda Rollen is violating her non-compete agreement and the station owner is complicit in that.
So we spoke with legal experts about non-compete agreements.
According to the suit, the transmitter for WXXC-FM in Marion is 40 miles from the NASH-FM transmitter in Springport and the business address for Hoosier AM/FM stations is 37 miles from the Springport transmitter. Cumulus claims she’s violating a non-compete which stipulated Rollen couldn’t work in the same capacity within a 50-mile radius of the NASH transmitter for six months after leaving the station.
They further allege she and Hoosier are in violation of “the approval, acceptance and goodwill she developed with the NASH-FM” audience.
In general, non-compete agreements are “highly controversial” and governed by state law, Womble Carlyle’s Gregg Skall tells RBR+TVBR in an interview. “Generally courts will look for a way not to enforce them.”
One criteria most states look to is whether the agreement is short, both distance-wise and in time. “The idea is you should not be able to prevent someone from working an earning a living,” he explains.
In this case and in last year’s case when Big Boy jumped from Emmis to iHeart in Los Angeles, one of the arguing points concerned “goodwill,” meaning the former station invested time and money to promote that person to build up their listeners. In general a new employer can pay the former employee more because they haven’t invested in that person.
Fletcher Heald’s Frank Montero agrees that while non-competes can be enforceable, that can “vary dramatically from state to state. In some jurisdictions they are barely enforced or are severely limited geographically and cannot extend beyond a given period of time,’ he tells us.
Additionally, for many years, the American Federation of Television and Radio Artist’s labor union, which merged with the Screen Actors Guild in 2012 has lobbied state-by-state to have non-competes as applied to broadcast personalities and staff deemed unenforceable, according to Montero.
Despite that, you will frequently see non-competes in contracts, even in states where they are largely unenforceable for various reasons. “For one thing, payments made pursuant to a non-compete may have certain tax benefits. Another reason is that non-compete clauses do have a deterrent effect. Even if it is unenforceable, the uninformed employee may be reluctant to violate the covenant,” he says.
And often the non-competes are boilerplate language that was never taken out of a standard contract form. So just because it’s in the contract, don’t assume it is enforceable, he says.
Skall says other agreements can accomplish similar things a non-compete can and save station owners lots of hassles. For example, Skall describes the California legal environment as “tough” and he has recommended to clients they offer an employee a consultant position after they’re no longer an employee instead of making that person sign a non-compete up front.
“Owners can deal with most of these issues if they think ahead,” says Skall. Perhaps as part of an employment agreement, both parties agree that a DJ’s character is the property of the station and not the air talent.
