The Briefing: Is the FTC Recent Rule on Non-Competes a New Reality for Reality TV Stars

The FTC just issued a final rule banning post-employment non-compete clauses, and it's shaking things up, especially in the non-scripted TV world. How will this impact talent deals? Join Weintraub attorneys Scott Hervey and Shauna Correia as they discuss what this means for networks and on-air talent on the latest installment of “The Briefing.”   Get the full episode on the Weintraub YouTube channel here or listen to this podcast episode here. Show Notes: Scott The FTC recently issued a final rule banning post-employment non-compete clauses in agreements between employers and their workers. While this is causing consternation with the standard corporate GC set, in-house counsel of television networks that are heavy into non-scripted television are quietly expressing concern. Why? Well, post-term exclusivity provisions are huge in the non-scripted television industry, and they're used to prevent non-scripted talent from jumping ship. I'm Scott Hervey from Weintraub Tobin, and today I'm joined by my partner, Shauna Correia. We're going to talk about this FTC ban and how it will impact non-scripted talent deals on today's installment of “The Briefing” by Weintraub Tobin.   Shauna, welcome to “The Briefing.”   Shauna Thanks for having me, Scott.   Scott Okay, so Shauna, why don't you tell us what this ruling actually says?   Shauna This 540-page rule that the FTC came up with prohibits an employer from entering into or attempting to enter into any post-employment non-competent clause with a worker in the United States. The definition of worker is very broad. It applies to all-natural persons, so that's direct and indirect relationships with employees and independent contractors. There are a couple of important but narrow exceptions. First, it does not apply to senior executives, which is defined as individuals making over $151,164 in annual compensation and are in a policy-making position for the company like a CEO or president, and the non-compete agreement was in place before the rule took effect. Second, it doesn't apply in connection with a legitimate sale of a business. Third, it doesn't apply to a small number of industries, which include nonprofits or specific industries like air carriers or ground transportation or banks that are not governed by the FTC but are regulated by some other governmental agency. But the vast majority of industries are covered by this.   Scott What about existing non-competes?   Shauna It's important to note that this rule will not take effect for 120 days from today, May 7th. We have until September 4th before it becomes law. But assuming the rule takes effect, unless this worker is a senior executive, the rule as written will apply to retroactively ban enforcement of existing non-competes. Also, to note, if a cause of action for a breach of a valid non-compete has accrued prior to the effective date of the rule, that can still be enforced.   Scott Companies that have non-competed agreements in place, they're also required to send out a notice of non-enforcement, correct?   Shauna Right. Employers are going to be required to send out a clear and conspicuous notice to all workers that have a non-competent provision in their contract, and the notice will have to tell the workers that the non-compete provisions will not and cannot be legally enforced.   Scott A company can't satisfy this by, say, putting a notice on its website, can't it?   Shauna No. The rule will require individualized communication, but it's pretty open.