Radio managers worried about employees leaving following the FTC’s nationwide ban on non-compete agreements are breathing a little easier this morning. A federal judge in Texas has struck down the FTC rulemaking, nullifying the planned September 4 start date.
The court ultimately decided that the FTC lacked the authority to enforce such a comprehensive prohibition. Presiding US District Judge Ada Brown stated in her decision that the FTC’s approach was “arbitrary and capricious” due to a lack of sufficient evidence justifying the broad ban rather than focusing on specific harmful non-compete clauses.
She emphasized that the FTC should operate within the confines set by Congress, not based on its own discretion. Before the complete halt, Judge Brown had previously delayed the ban’s implementation with an injunction in the case of Ryan LLC, a Dallas-based tax firm.
If the FTC appeals the ruling, it will be heard by the Fifth Circuit Court of Appeals, potentially leading to a prolonged legal process. Given the mixed rulings in other states like Florida and Pennsylvania, there’s a possibility this issue could escalate to the Supreme Court for a definitive resolution.
In the meantime, the FTC might now turn to individual enforcement actions to address non-compete agreements.
The new rule would have rendered existing noncompete clauses unenforceable for the vast majority of workers, exempting less than 0.75% of senior executives earning over $151,164 with policy-making roles. Creating new noncompetes with these executives would have also been prohibited after September 4.
The ruling fanned the flames of a fierce divide in the radio community, as many managers and operators defended non-competes. Companies have argued that the policy protects business integrity and the investments made in training and recruiting employees. Opponents – from air talent to leadership – argue that such agreements restrict wage growth, hurt job conditions, and limit the available talent pool for stations seeking to innovate and grow.
Here’s a novel idea; how about you start treating your employees with respect, pay them a fair wage, quit slashing sales commissions and perhaps they won’t want to remain. Radio today does virtually no audience or listener research little to no sales training, so what do managers and executives have to fear when an employee walks?
It’s interesting to note that while the FTC noncompete ban has been judicially challenged, the FCC’s Media Bureau continues to enforce its own policy of limiting and prohibiting certain noncompetes in the broadcasting industry.