On October 22, 2013, four regular reviewers on Yelp, Inc. (“Yelp”) sued Yelp in California District Court on behalf of a putative class, claiming that “every day millions of people use online reviews” and that the “hordes” of posters who contribute reviews to Yelp are being unfairly denied wages in violation of the Fair Labor Standards Act. Yelp makes most of its money through advertising sales, brand advertising and affiliate revenue. The content though is largely user-generated.
You can read the Complaint here. The plaintiffs also allege quantum meruit and unjust enrichment. It is an interesting claim and might have been interesting litigation.
Unfortunately, the case is over. As LegalNewsLine notes, Yelp filed a Motion to Dismiss. As to the FLSA claims, Yelp argued that it was not an “employer” of the “reviewers” because it did not have the power to hire and fire, lacked supervision and control over contributors, never determined pay rates, and never maintained employment records. The Plaintiffs, as it turns out, did not even put up a fight.
The District Court dismissed the case, not necessarily because Yelp made a winning argument, but because Plaintiffs filed no response during the time provided by the rules.
The National Association of Black Owned Broadcasters (“NABOB”) has evidently pitched an alternative to the heavily anticipated crackdown on Joint Service Agreements (“JSA”) and Shared Service Agreements (“SSA”). You can read the ex parte disclosure by NABOB about the proposal here. According to the disclosure, NABOB Executive Director James Winston said some of the following to certain FCC Commissioners last week:
On February 26, 2014, the undersigned Executive Director and General Counsel of the National Association of Black Owned Broadcasters, Inc. (“NABOB”) met with Commissioner Mignon Clyburn and Adonis Hoffman, Chief of Staff to Commissioner Clyburn. In the meeting, I explained NABOB’s view that the continuing decline in minority broadcast ownership needs to be addressed in the Commission’s Quadrennial Review. I pointed out that less than ten years ago there were 21 full power commercial television stations licensed to African American controlledcompanies in the United States, and today there are only three. Moreover, of those three stations, two were just recently acquired and are being operated pursuant to Joint Sales Agreements (“JSA”) and Shared Services Agreements (“SSA”). Therefore, there is only one full power commercial television completely operated by an African American owned licensee.
The fact that there are so few African American owned television stations is a sad commentary on the state of diversity in the broadcast industry and calls Ms. Marlene H. Dortch February 27, 2014 for action on the part of the Commission to improve this abysmal ownership situation. I pointed out that the situation has caused NABOB to reconsider its previous position on JSAs and SSAs. I explained that NABOB has always opposed JSAs and SSAs, because they appeared to be mere gimmicks for group licensees to avoid the intent of the local ownership rules. However, NABOB and the Commission are faced with an unfortunate fact. Two of the three full power television stations licensed to African Americans are being operated under JSA and SSA agreements. In addition, given the precipitous fall-off of African American television ownership in the past few years, and the accelerating pace of consolidation that has roiled the television industry in recentmonths, there is no reason to be optimistic that the number of African American owned television stations is going to appreciably increase in the near future without some serious rethinking of the Commission’s policies.
. . .
To this end, I suggested that the Commission look at JSAs and SSAs on a case-by-case basis to see if they have the potential to promote diversity of ownership or other important Commission policies. If so, the Commission could place conditions on such JSAs and SSAs such that these agreements would be structured to enable the licensee of the station to eventually operate the station without the need for a JSA or SSA. In other words, the JSA or SSA would have clear steps in place that turned over full operation of the station to the licensee over time. For example, the JSA or SSA might be structured such that at predetermined periods, perhaps annually, the licensee and the JSA or SSA operator would file a progress report with the Commission reporting on the operational changes that have occurred in the reporting period that have turned over specific responsibilities to the licensee, and the licensee would identify the personnel and other enhancements it has made to the station to take over these responsibilities.
In this arrangement the JSA or SSA operator would be required to turn over full control to the licensee in a set period, perhaps five years. The annual reporting to the Commission should demonstrate that that licensee was making progress toward taking control. If the annual reporting failed to demonstrate that the licensee was making progress toward operating the station, the Commission could order an early termination of the JSA or SSA. In any event, whether the licensee had fully obtained the ability to operate the station over the five year period, the JSA or SSA would terminate at the end of that period.
TVNEWSCHECK first reported this and you can read their story, which includes comment from the National Association of Broadcasters (“NAB”), linked here.
NAB spokesman Dennis Wharton said of the proposal: “”NAB has documented numerous examples to the FCC of JSAs that benefit the public interest, improve local news, and provide badly needed competition to pay TV giants. NABOB deserves credit for coming up with another creative idea that could enhance TV ownership diversity in broadcasting. We think this idea merits serious consideration.”
A reporter in Naples, Florida filed a suit over arguably excessive and “retaliatory” duplication fees that, she claims, vastly exceed the reasonable rate requirement codified in Florida statute. The Clerk tried to charge $1.00 per page. You can read the Complaint here.
This is from the Watchdog City blog:
Florida’s Government in the Sunshine Manual, on pages 167 and 168, specifically states that a Clerk of Courts cannot charge $1 a page for non-court and non-official records. The Sunshine Manual further references two Attorney General Opinions that prohibit this fee. The attorney general opinions are AGO 85-80 and AGO 94-60.
The Florida public records law, F.S. 119, sets forth copying charges for paper county documents at 15 cents a page, but it’s questionable whether Brock has the authority to impose even 15 cents per page for the electronic records sought by Naples City Desk.
The Tennessee Public Records Act similarly maintains a “schedule of reasonable charges”, codified at Tenn. Code Ann. §8-4-604(8)(1), and described here in this article from the Comptroller’s office. In Tennessee, it’s 15 cents for black and white and 50 cents for color. Interestingly, public agencies may also charge a requesting party the responding individual’s hourly wage as a labor cost, to cover the labor involved in locating and duplicating the records.
I noticed this fascinating tidbit by way of the New York Times today. Evidently, a group protesting the Citizens United ruling snuck a camera into the Court for oral argument in McCutcheon v. FEC.
The group claiming responsibility for the videos, linked here, and embedded below, is called 99rise. According to the NYT, this group “wants to ‘reclaim our democracy from the dominance of big money.’”
From the NYT article:
The videos, which are brief and shaky, represent a major breach of Supreme Court security. Visitors to the courtroom pass through metal detectors and are told they may not bring electronic devices into the courtroom. The court has never allowed camera coverage of its proceedings.
Kathleen Arberg, a spokeswoman for the court, said officials there were looking into the matter. “The court became aware today of the video posted on YouTube,” she said. “Court officials are in the process of reviewing the video and our courtroom screening procedures.”
You can read the NYT article here.
99Rise co-founder Kai Newkirk joined HuffPost Live Friday to discuss his role in the first disruption of a Supreme Court argument session in more than seven years. Newkirk was mum on the details of how his group got a camera into the proceedings, claiming that they “just walked in.”
He was escorted out of the courtroom and spent a night in jail for his role in the disturbance, calling it a “small price to pay for freedom.”
“The Supreme Court has played a huge role in deepening the corruption of our democracy,” Newkirk said, citing the Citizens United decision and McCutcheon v. FEC case. “We wanted to show the court and, more importantly, the people of our country that we’re not going to sit silently.”
It is very common for journalists to sign contracts which contain provisions called “Liquidated Damages”, which purport to set forth an amount due to one party in the event of the other’s breach. Typically, these are construed by management and employee alike as “buy-out” clauses. Although that construction is not really wrong, it does, to some degree, misstate the purpose of a liquidated damages provision, which is to provide certainty to contracting parties, at the time of contract, when trying to anticipate the damages likely to be borne by a non-breaching party in the event of a later breach.
Hypothetically, in the broadcast context, an employer might hire a new anchorperson for a non-primary show and sign that person to a three-year deal. They might decide that the liquidated damages should be, for the sake of discussion, $12,000.00 in the event of breach. This amount is supposed to represent what the parties agree the loss (damages) to the other would be in the event of breach. Let’s say that, during that three-year term, that employee is heavily marketed by the television station and promoted to be a mainline anchor. At that point, you can see that $12,000.00 might not accurately reflect the potential damages to the employer if the employee were to breach. They might, in fact, be much greater. Still, the employer’s risk is that this talented employee could walk and, per the contract, the most the employer could recover is the “liquidated” damages amount.
Let’s flip this around. Let’s say the television station hires an anchor and the parties agree to a $12,000.00 liquidated damages provision in the event of breach. The hire is a disaster. The anchor cannot read, fails to show up for work, and cannot get along with his or her teammates. The anchor is then demoted to reporter and assigned to an unpopular shift. The station has decided they made a mistake and has effectively hidden the anchor in a lesser position, on a less attractive schedule, thereby limiting that employee’s opportunity to grow. In this case, it seems unfair to make the employee have to pay $12,000.00 to get out of a contract that the employer clearly no longer values the same way it did at the beginning. Still, the employee feels chained to that job by the “enormity” of that liquidated damages provision.
In both of these cases, had there been no liquidated damages provision, the parties would go to court, and it is exceedingly likely that the proof would show that the parties would be damaged in ways that varied substantially from the hypothetical $12,000.00 amount. Each party would have to hire lawyers and put on proof about their value (or lack of value) to the employer. In the first case, the station would probably be able to show that $12,000.00 is insufficient to make it whole in the event of the employee’s breach, because the station had so much tied to that employee’s image. In the second case, the station might lose its claim for heightened damages, because the employer had basically invested nothing in the employee and might not be damaged at all if the employee left.
So, why are these provisions built in to all of these contracts, if they often fail to accurately reflect the true damages arising in the event of breach?
Believe it or not, the goal is to create certainty in an uncertain economic relationship. These provisions are supposed to represent the best we can do to put our arms around the uncertainty that exists in the employment relationship. Contract damages are not allowed to be punitive (to punish), so liquidated damages that appear to be punitive should not be enforceable.
Here’s what the Restatement (Second) of Contracts § 356 (1981) has to say about liquidated damages:
(1) Damages for breach by either party may be liquidated in the agreement but only at an amount that is reasonable in the light of the anticipated or actual loss caused by the breach and the difficulties of proof of loss. A term fixing unreasonably large liquidated damages is unenforceable on grounds of public policy as a penalty.
(2) A term in a bond providing for an amount of money as a penalty for non-occurrence of the condition of the bond is unenforceable on grounds of public policy to the extent that the amount exceeds the loss caused by such non-occurrence.
To generalize, many, if not most states, have embraced this concept, and will not enforce a liquidated damages provision that is punitive, or unreasonable “in light of the anticipated or actual loss caused by the breach.”
To those based in Tennessee, here’s how our Supreme Court approaches these provisions:
The fundamental purpose of liquidated damages is to provide a means of compensation in the event of a breach where damages would be indeterminable or otherwise difficult to prove. By stipulating in the contract to the damages that might reasonably arise from a breach, the parties essentially estimate the amount of potential damages likely to be sustained by the nonbreaching party. “If the [contract] provision is a reasonable estimate of the damages that would occur from a breach, then the provision is normally construed as an enforceable stipulation for liquidated damages.” However, if the stipulated amount is unreasonable in relation to those potential or estimated damages, then it will be treated as a penalty.
Guiliano v. Cleo, Inc., 995 S.W.2d 88, 98-99 (Tenn. 1999).
For those of you who may be more interested in how this shakes out in Tennessee, you may read further below from the Guiliano opinion. In essence, Tennessee courts will only look at how the contracting parties estimated their potential loss at the time of contract and will not consider evidence about actual loss. Apply that to the above two hypothetical scenarios and you can see why these provisions are troublesome. In Tennessee, they will be enforced if they were reasonable at the time of contract. So to win a legal dispute about liquidated damages in Tennessee, a litigant would have to prove that the liquidated damages were unreasonable at the time of contract. Read on and try to remember when you negotiated your deal. Would you say this accurately reflects the negotiation that occurred?
Although most jurisdictions disfavor the enforcement of penalties under contract law, there is a split in authority on the proper method for determining whether a liquidated damages provision constitutes a penalty. One method, commonly referred to as the “prospective approach,” focuses on the estimation of potential damages and the circumstances that existed at the time of contract formation. Under this approach, the amount of actual damages at the time of breach is of little or no significance to the recovery of liquidated damages. If the liquidated sum is a reasonable prediction of potential damages and the damages are indeterminable or difficult to ascertain at the time of contract formation, then courts following the prospective approach will generally enforce the liquidated damages provision. In contrast, a second approach has developed in which courts not only analyze the estimation of damages at the time of contract formation, but also address whether the stipulated sum reasonably relates to the amount of actual damages caused by the breach. Under this retrospective approach, the estimation of potential damages and the difficulty in measuring damages remain integral factors for the courts’ review. However, as part of that review, the actual damages at the time of breach are also relevant in determining whether the original estimation of damages was reasonable. If the liquidated sum greatly exceeds the amount of actual damages, then courts following this latter approach will treat the estimated sum as a penalty and will limit recovery to the actual damages.
However, we conclude that the prospective approach is the better rule based upon the consideration it affords to the intentions of the parties and to the freedom to contract. When parties agree to a liquidated damages provision, it is generally presumed that they considered the certainty of liquidated damages to be preferable to the risk of proving actual damages in the event of a breach. Liquidated damages permit the parties to allocate business and litigation risks and often serve as part of the contractual bargain. In addition, they lend certainty to the contractual agreement and allow the parties to resolve defaults and other related disputes efficiently, when actual damages are impossible or difficult to measure.
Guiliano v. Cleo, Inc., 995 S.W.2d 88, 100 (Tenn. 1999)
FCC Commissioner acknowledges that some SSAs may be “designed to patently circumvent the ownership rules”
In a speech to the Media Institute yesterday, FCC Commissioner Mignon Clyburn spoke at length about the myriad issues facing the current Commission, but said the following about Shared Service Agreements and Joint Services Agreements:
Also, over the last few weeks, my office, along with those of my colleagues, has been abuzz with industry representatives, consumer groups, and other stakeholders, on the attribution rules. The whole issue of JSAs and SSAs presents a quandary for someone like me, because I recognize the needs of small and medium sized media markets and the desire and need to provide news and local stories to those markets, on the one hand. On the other hand, we have heard a good number of anecdotes about how such arrangements have been designed to patently circumvent the ownership rules — and that is not good for anyone. Suffice it to say, that I have an open mind on the issue and will look closely at what is put into circulation.
I favor competition and diversity of voices in the delivery of broadcast services, and want to ensure that consumer choice is a key part of advancing the public interest and I favor policies that will serve to create, and expand ownership opportunities for small businesses and new entrants, but I recognize that there are barriers to entry, including access to capital, which present problems for diverse ownership and voices.
You can read her entire speech on The Media Insitute’s web site here.
FCC Commissioner Michael O’Reilly released the following statement late today about the proposed Critical Information Needs study. The study has drawn ire and national attention during the past week, particularly that portion that would have had researchers interviewing newsroom personnel.
“House and Senate Republicans, along with Commissioner Ajit Pai, have voiced their serious concerns about the Commission’s Critical Information Needs (CIN) study. While I was not at the Commission when the study was authorized, I share those concerns. I appreciate the Chairman’s willingness to make revisions, but I am afraid that tweaking it is just not enough. If any value was ever to come from this particular exercise, that ship has sailed. It is probably time to cancel the CIN study for good.”
– FCC –
The Department of Justice has recently thrown its support behind an FCC plan to impose new restrictions on Shared Services Agreements (SSA), also called Joint Services Agreements (JSA), between multiple stations in a given broadcast market. Such agreements have become increasingly common, where budgets have tightened and resources have dwindled.
Under these arrangements, stations agree to share resources, like helicopters or news crews. Each of these SSA’s appears to play out differently. In one hypothetical, a single station might cover an important press conference and then share the tape with the other news organizations. Other agreements, like those referenced in a great New York Times piece on SSA‘s by Brian Stelter from 2012 suggest that competing news organizations might even split up and jointly cover events throughout the course of a given news day.
From the New York Times:
SAN ANGELO, Tex. — Call a reporter at the CBS television station here, and it might be an anchor for the NBC station who calls back. Or it might be the news director who runs both stations’ news operations.
The stations here compete for viewers, but they cooperate in gathering the news — maintaining technically separate ownership, but sharing office space, news video and even the scripts written for their nightly news anchors. That is why viewers see the same segments on car accidents, the same interviews with local politicians, the same high school sports highlights.
The Times piece cites a University of Delaware study finding such agreements extant in 83 television markets. The opposition to these agreements comes from those who feel that such agreements undermine the competition that should exist in a news market where stations aggressively compete to do a better job of unearthing important public news.
Public interest groups have criticized the cutbacks at local newsrooms because they reduce the number of editorial voices in a given market. They assert that because TV stations hold licenses to the public airwaves, they have a responsibility to serve local communities. “The same cookie-cutter content above a different graphic doesn’t cut it,” said Craig Aaron, the head of Free Press, a nonprofit media reform group that has gathered case studies of sharing by stations.
Notwithstanding that concern, the FCC is apparently worried that these SSA’s may be subverting the federal rules on station ownership, which currently prohibit ownership of two stations unless the market has at least eight stations held by different owners.
The U.S. Justice Department has recently expressed its support for a new FCC proposal that would require that “any station owner that sells 15% or more of the advertising time in another owner’s station through a JSA would have to count that station toward its tally of properties in that market.” Evidently the proposal would also require existing non-compliant SSA’s and JSA’s to be terminated after two years. According to thestreet.com, public comment will be solicited.
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:
(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 consideration. Egads! 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:
- As a starting point, covenants not to compete are disfavored in Tennessee.
- 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.
- 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.”
- 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:
- Against whom specifically should a non-compete be enforceable? Should a photographer be bound by one of these provisions?
- 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”?
- 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?
- 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.
You can read more here.
During the last week of January 2014, a former television reporter at a station in Portland, Oregon filed a complaint in the Portland Division of the U.S. District Court for the District of Oregon, alleging that he was never paid overtime to which he was entitled under the Fair Labor Standards Act (“FLSA”). His complaint also alleges FLSA retaliation as a distinct cause of action. (Note: the Plaintiff additionally alleges a number of other state causes of action and what appears to be an individual ADA claim, which I will not discuss here). At its root, this suit, and others like it (our firm has raised similar claims on behalf of former media personnel) address the arguable ambiguity in the FLSA over whether a journalist should be “exempt” or “non-exempt”. In the former case, he is not subject to the overtime requirements and may be paid a salary; in the latter case, he must be paid for every hour worked over forty in a given work-week.
You may read the complaint here.
To thumbnail this, the FLSA creates a number of classes of employees who are exempt from the requirements that they be paid overtime. These include commissioned sales employees, computer professionals, drivers, driver’s helpers, loaders and mechanics, farmworkers employed on small farms, salesmen, partsmen and mechanics employed by automobile dealerships, employees at seasonal and recreational establishments, and executive, administrative, professional and outside sales employees. The relevant exemption for the purposes of this case is probably the “professional” exemption which can be practically split into the “learned professional” exemption and the “creative professional” exemption.
As you can see in the Department of Labor’s white sheet on exemptions for journalists, which I have provided elsewhere on my site, they are typically considered under the “creative professional” exemption. If you look at the requirements for that exemption, you will see that, notwithstanding the salary minimums, a journalist is exempt from the overtime requirements if “the employee’s primary duty is work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor (e.g., the fields of music, acting, writing and the graphic arts), as opposed to routine mental, manual, mechanical or physical work.” Wow. So how does a tv or print reporter fit into that rubric?
Here is some more from that white paper:
[T]he final regulations clarify that employees of newspapers, magazines, television and other media are not exempt creative professionals if they only collect, organize and record information that is routine or already public, or if they do not contribute a unique interpretation or analysis to a news product. For example, reporters who rewrite press releases or who write standard recounts of public information by gathering facts on routine community events are not exempt creative professionals. Reporters whose work products are subject to substantial control by their employer also do not qualify as exempt creative professionals. However, employees may be exempt creative professionals if their primary duty is to perform on the air in radio, television or other electronic media; to conduct investigative interviews; to analyze or interpret public events; to write editorial, opinion columns or other commentary; or to act as a narrator or commentator.
To translate (my take): If you go out and simply cover event-driven news, you are not exempt and are entitled to overtime. By contrast, if you are contributing opinion, are “performing”, or are conducting “investigative interviews” or analysis, an employer may lawfully deny you overtime.
Anyone who has worked in a newsroom should see the problem here: Most reporters chase event-driven stories, but their employers want them to do more. A typical general assignment reporter at a television station should come to a morning editorial meeting with a story pitch that is source-driven and derived from some level of investigation; this is the expectation. In fact, many newsrooms mandate this. In practice, many reporters do not develop sources and wait for an assignment editor to send them to a fire or a homicide, etc.
So what should a media company take away from this? Clearly, it is impractical from an accounting standpoint to create different classes of reporters. To take the position that your reporting staff is non-creative and therefore, non-exempt, exposes you to FLSA liability (as seen in this litigation) and statutory liquidated damages, not to mention that it is, on some fundamental level, disingenuous (how could a news organization, in good faith, claim that its reporting staff never “conducts investigative interviews” and expect to have any credibility in the community?). A number of media companies continue to do this however, and, as typified by this lawsuit and others, are going to have to trek through this clear legal quagmire, at great expense, to find resolution. Alternatively, other media companies have, during the past half-decade, elected to convert their entire reporting staffs to exempt status. This means that once-salaried reporters are now making their salary-plus-overtime and it has surely added significantly to newsroom overtime budgets. It is however, the conservative approach, and may bring certainty that they have controlled their exposure under the Act.
To those companies that have not taken this “conservative” approach, the ambiguity in the statute has created opportunity for plaintiffs. The wrongful classification of an employee may entitle that employee to backpay (unpaid overtime for all hours over 40 worked), liquidated damages and, as argued in this case, punitive damages for alleged retaliation (if you terminate an employee who claims that you fired him for notifying you of the misclassification).
If you worked for one of those media companies that went through a large-scale payroll conversion, you now know why. Here again is a link to the DOL’s position on journalists.