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Broadcast non-competes in Tennessee

In 2003, then State Senator Steve Cohen and then State Representative Rob Briley introduced the Tennessee Broadcast Industry Free Market Act of 2003.  The proposed legislation, which was ultimately defeated in committee, would have modified Tennessee’s version of the Uniform Commercial Code (in particular, the title dealing with restraint of trade, Tenn. Code Ann. §47-25-1), to prohibit non-compete agreements in Tennessee among non-managerial staff at television, radio and cable stations.  The specific language of the bill (SB0147/HR0280) provided as follows:

AN ACT to enact the Tennessee Broadcast Industry Free Market Act of 2003 and to amend Tennessee Code Annotated, Title 47, Chapter 25 and Title 50.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF TENNESSEE:
SECTION 1. Tennessee Code Annotated, Title 47, Chapter 25, Part 1, is amended by adding the following new appropriately designated section:
Section 47-25-1___.
(a) This act shall be known and may be cited as the “Tennessee Broadcast Industry Free Market Act of 2003”.
(b) As used in this act, unless the context otherwise requires:

(1) “Broadcasting industry” means television, radio and cable stations; and
(2) “Broadcast employee” means any employee of a broadcasting industry employer, other than a sales or management employee.

(c) No broadcasting industry employer may require in an employment contract that an employee or prospective employee refrain from obtaining employment in a specific geographic area for a specific period of time after termination of employment with that broadcasting industry employer.
(d) This section does not prevent the enforcement of a covenant not to compete during the term of an employment contract or against an employee who breaches an employment contract.

SECTION 2. This act shall take effect upon becoming a law, the public welfare requiring it.

According to Briley, a practicing attorney in Nashville, who was kind enough to respond to my email this morning, “the bill never really got off the ground on the House side, so its hard for me to say what forces may have opposed it.  Although, the broadcast lobby would be the most likely suspect.”  Certainly, while the American Federation of Television and Radio Artists (“AFTRA”) supported it, the Tennessee Association of Broadcasters was outspoken in its opposition.  No comparable legislation has since surfaced.

I remember that the local broadcast industry, at least those front-line folks who would have been affected, were deeply interested in the progress of the bill at the time.  After all, for a television reporter, producer, or photographer in Memphis, there are really only four potential employers.  Frequently, new employees, grateful to find work in a highly competitive industry, are faced with these contract provisions which limit their ability to work for a competitor for a pre-determined period of time after separation, no matter the reason for the separation.  Because the language is part of the contract and because, in total candor, these new employees simply do not have the same bargaining strength as their potential employers, the new employees agree to restrict their mobility prospectively (I will discuss unconscionability and contracts of adhesion in a later post).  Sometimes, stations will get current (existing) employees to sign addendums to their employment agreements, creating these restrictions, without offering new considerationEgads!  Employees agree, of course, because they believe they have no choice.

The practical effects and implications of non-competes in the broadcast industry are many.  Even though a particular non-compete provision may not be enforceable, competing employers seem to have “unspoken agreements” not to hire away an employee terminated by a competitor during the restricted period.  They do this both to validly protect themselves from liability for tortious interference, but also, and more practically, because all of these competing employers have a shared interest in the “value” of these provisions (translation:  if we hire their guy during the non-compete period, they might do that to us).

For the front-line folks (reporters, producers, photographers) who are arguably bound by these provisions, there are, at least, two very important implications:  1) if they are not happy, they believe they cannot go across town to work for the competitor, even after their contract is up (or even if they are terminated); and 2) they have zero bargaining power at contract renewal time (unless they are prepared to leave the market) to, for example, substantially increase their salaries.

I have created a short “primer” page on the issue of non-competes elsewhere on this site. Absent legislation to the contrary, here is the state of the law on non-competes in Tennessee direct from the state Supreme Court in 2005:

  1. As a starting point, covenants not to compete are disfavored in Tennessee.
  2. Because they are considered to be a restraint on trade, a court interpreting a non-compete should construe it strictly in favor of the employee.
  3. A Tennessee Court may find a non-compete enforceable if “there is a legitimate business interest to be protected” and the “time and terroritorial limitations are reasonable.”
  4. To determine whether the limitations are reasonable, a Tennessee Court will look at (1) the consideration supporting the covenant; (2) the threatened danger to the employer in the absence of the covenant; (3) the economic hardship imposed on the employee by the covenant; and (4) whether the covenant is inimical to the public interest.

As I note on my primer page, other states have codified prohibitions on broadcast non-competes.

In Tennessee, I think it is fair to say that there is substantial uncertainty on the employee level about the enforceability of contractual non-compete provisions.  Candidly, I think there is probably also some uncertainty on the employer side as well.  The bottom line though, is that employers have been savvy enough in negotiating separations to keep this out of the courts and, as a result, there is no court-made law on the enforceability of broadcast non-competes, in particular, in Tennessee.

In light of the rubric adopted by the Tennessee Supreme Court, paraphrased above, here are some open questions:

  1. Against whom specifically should a non-compete be enforceable?  Should a photographer be bound by one of these provisions?
  2. What about an on-air personality who has not been marketed by the station and in whom the station cannot show a “legitimate business interest to be protected”?
  3. What about behind-the-scenes line producers, who are responsible for building each newscast, but are neither marketed by the station nor privy to the station’s proprietary research or strategic planning?
  4. Finally, how long is too long to restrain someone from going to the competition?

Certainly, these restrictive covenants are important for news decision-makers and management, franchise talent, etc.  Good arguments could certainly be made for their enforceability in those contexts.  Until they are truly litigated (or legislated) for the many other classes of broadcast employees however, they remain powerful forces of restraint because both the employers and employees believe they are enforceable.

NONCOMP

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