Despite the recent reversal of the U.S. Federal Trade Commission (FTC) ban on employee noncompete agreements (NCA), the agreements continue to present a significant risk for an employer’s reputation. WISH-TV Channel 8, an Indianapolis television station, recently fired more than 20 employees after they refused to sign updated contracts. The contracts included NCAs that would have prevented them from working in just about any other type of media position for one year after their date of departure. The previous contracts contained a much narrower noncompete clause, which just precluded them from working for another local broadcast station.
Some employees told the Indianapolis Star that they felt the newly included noncompete clause was far too broad. Furthermore, the clause applied not only to on-air staff members, but also to staff members in roles that NCA don’t typically cover.
The mass termination of employees by WISH-TV came just one week after a state court judge ruled the earlier version of the noncompete clause was not enforceable against a former meteorologist. Ashley Brown Elliott sued after alleging that WISH-TV had fired her for criticism of the station’s treatment of Black female employees. WISH-TV owner, DuJuan McCoy, characterized Elliott’s statements as “utterly false and defamatory.”
The FTC under former President Joe Biden had pushed for the broad noncompete ban, which won final approval in April 2024. Opponents of the ban immediately filed lawsuits blocking the rule, and Biden’s FTC appealed. However, under President Donald Trump, the FTC has now withdrawn from those appeals.
With the FTC rule no longer at issue, many NCAs may be legal, especially those that affect high-ranking employees. The current FTC has announced its intent to focus its enforcement efforts on NCAs that involve lower-paid workers. Some states also have laws in place that limit the agreements in various ways.
Nonetheless, most Americans dislike noncompete agreements. An Ipsos poll in May 2024 shows that almost 60% of Americans supported the FTC rule banning NCAs.
As a result, employers should consider the potential damage that litigation over NCAs may cause to their reputations, particularly as the media publicly covers the disputes. Aggressive noncompete enforcement can create significant reputational harm for employers that can adversely affect their market position, as well as their ability to attract quality employees. The negative consequences of instituting broad NCAs can also generally decrease employee morale, especially when employers can achieve their goals through less restrictive alternatives, such as non-disclosure or non-solicitation agreements as part of employee contracts.
Overall, employers should determine their company’s noncompete policy and apply it uniformly to employment contracts as applicable. If employers opt to institute NCAs, they must be prepared to vigorously enforce them, regardless of the potential fallout. Otherwise, they will not be successful in protecting those legitimate business interests that their noncompete policy is meant to protect.
HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 470-571-1007.
